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USD/JPY holds onto recovery gains above 107.00 amid broad US dollar strength

  • USD/JPY keeps the pullback moves from 106.78, consolidates around 107.30.
  • US President Trump’s comments favor the greenback on a light calendar day.
  • Risk sentiment dwindles amid hopes of economic re-open and trade/virus fears.
  • Japan PPI, China data dump can entertain traders in Asia, a slew of US economics to dominate afterward.

USD/JPY seesaws around 107.25/30 during the pre-Tokyo Asian session on Friday. That said, the yen pair snapped two-day losing streak the previous day as the US dollar registered broad gains despite downbeat US data. The reason could be traced from US President Donald Trump’s upbeat comments.

Trump beats economics and drives the dollar up…

Having initially disagreed with Fed Chair Jerome Powell over negative interest rates, US President Trump favored strong US dollar (surprisingly) while also reiterating his push for the economic restart. Markets took it as a positive sign to ignore downbeat US Jobless Claims, 2,981K versus 2,500K forecast.

The greenback’s safe-haven allure could also be responsible for the pair’s recovery moves. The risk-tone sentiment flashes mixed signals with US-China tension escalating and the fears of virus spread 2.0 firming up amid hopes of the economic restart.

Recently, CNN’s Haley Byrd tweeted that the US Senate passed a bill to sanction Chinese government officials responsible for internment camps in Xinjiang, where up to two million ethnic Muslims have been forcibly detained. There is one more bill in the Senate that could enable US President Trump to sanction China for its inability to comply with the virus outbreak investigation. All these moves weigh on the market’s risk-tone amid a fight between the world’s two biggest economies.

Also adding to the risk-off sentiment could be the White House Threats to use veto of House Democrats’ stimulus bill.

To portray the risks, Wall Street gained in the last hours to close the day on the positive side whereas US 10-year Treasury yields remain to drop 3.4 basis points (bps) to 0.617% at the end of Thursday’s trading.

Given the lack of major data during the Asian session, traders may keep eyes on the trade/virus updates as well as political headlines from the US for immediate direction. It’s worth mentioning that today’s US economic calendar is a heavy one with Retail Sales, Industrial Production and Michigan Consumer Sentiment Index posing as the front-liners.

Technical analysis

Pair’s pullback from 10-day EMA, currently around 107.05, favors another attempt to cross 50-day EMA figure of 107.70 and the monthly top near 107.77. Meanwhile, 106.00 can lure the sellers past-107.00.


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