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USD/JPY extends recovery gains above 107.00 as US Pres. Trump renews trade war fears

  • USD/JPY stretches previous recoveries from the multi-day low.
  • US President Trump holds China responsible for the virus outbreak, threatens to use tariffs to respond.
  • Japanese PM Abe will decide about the national emergency on Monday.
  • Japan’s Tokyo CPI, virus/trade headlines will be the key to watch.

While a 10-pip range between 107.13 and 107.23 restricts USD/JPY moves during the last hour, the yen pair does extend the pullback from multi-day low while taking the bids near 107.18 ahead of Friday’s Tokyo open. Even if the US data have been disappointing off-late, the market’s rush to risk-safety keeps the US dollar strong versus major counterparts. The reason for the Japanese yen’s weakness, despite its safe-haven appeal, could be traced to the virus outbreak in the Asian nation.

Risk aversion favors the greenback…

US President Donald Trump recently upped his fight against China’s perceived inability to warn global economies of the virus outbreak on time. The Republican leader initially probed the World Health Organization (WHO) to have favored the dragon nation and stopped the US contribution to the global institute.

In his latest comments, US President Trump warns the use of tariffs on China to respond to the nation’s performance. The businessman-turned-politician earlier said that the US trade deal with China has been “upset very badly” by the coronavirus (COVID-19).

Other than the renewed trade war fears, which were once the market catalyst before COVID-19 outbreak, the fears of global recession due to the pandemic, as well as a lack of the exact cure, also weigh on the market’s trade sentiment. In a case of Japan, the PM Shinzo Abe is expected to, as per NIKKEI, unveil his further plans for the national emergency that was to end early this month.

It should also be noted that the ECB’s lack of bold moves and downbeat US data failed to put a floor under the pair earlier.

Amid all these plays, Wall Street closed April month on a negative tone while US 10-year Treasury yields fail to portray any major moves around 0.65%.

Looking forward, USD/JPY is likely to keep struggling to justify the risk-safe allure of the USD and JPY. However, the US dollar is better suited for the pullback move amid the early-month buying as well as after the late-April declines. On the economic calendar, Japan’s Tokyo Consumer Price Index (CPI) as well as Tokyo CPI ex Fresh Food for April, expected 0.4% and 0.1% versus 0.4% prior for each, could direct immediate pair moves ahead of Jibun Bank Manufacturing PMI, prior 43.7.

Technical analysis

Despite the latest pullback, the pair is yet to cross the three-week-old falling resistance line, at 107.45 now, which in turn keeps March 10 top of 105.92 on the sellers’ radar.


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