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USD/JPY searches for firm direction above 111.00

  • USD/JPY mildly negative after marking the bullish exhaustion in the previous two days.
  • The US tries to restore investor confidence through aid packages, trade measures.
  • The US COVID-19 Bill and Jobless Claims will be the focus, US GDP could be an additional catalyst to watch.

USD/JPY takes rounds to 111.20 during the early Thursday’s Asian session. In doing so, the pair maintains the five-hour old range between 111.00 and 111.40. The pair recently struggles to justify the market’s optimism surrounding the US stimulus package to combat the coronavirus (COVID-19) and the broad US dollar weakness.

Following the news that the US policymakers finally agreed to the much-awaited COVID-19 bill, estimated around $2.2 trillion as per the latest comments from US President Donald Trump, the market’s risk-tone remains mostly positive. However, investors now look for directions concerning when and how the bill will be voted and passed as well as the execution part of it.

US President Trump recently showed readiness to sign the bill immediately on reaching his desk. However, his worries concerning New York City might grab the market’s attention as the City Mayor previously asked for military help to tame the pandemic. It’s worth mentioning that US President Trump and Treasury Secretary Steve Munchin both showed readiness to take extra measures to counter the epidemic, if needed, while the White House Economic Adviser Larry Kudlow spoke on the same earlier during the day.

On the other hand, Japan’s postponing of the Olympics and actions from the government/BOJ continues to help the Asian economy combat the deadly disease.

To portray the trading sentiment, the US 10-year treasury yields remain positive around 0.87% while the S&P 500 Futures also mark mild gains following Wall Street’s second day in the green.

Moving on, traders will keep eyes on the coronavirus updates and the US aid package while the US jobless claims and the fourth quarter (Q4) GDP data will also be important to watch.

Although the US Senators are near to voting the bill, expectedly on Friday, Fox News mentions a lack of clarity among the policymakers over the execution and formation of the deal. As a result, there may be a delay in the voting, which in turn could weigh on the recent risk-on sentiment.

Additionally, an expected spike in the US Jobless Claims, contrast to likely no change in the final reading of the US Q4 GDP, could also entertain the market during the US session. “Our thinking is that the risks are skewed higher rather than lower. There are 34 million jobs in the US across the retail, hospitality and leisure sectors alone,” said analysts at the Australia and New Zealand Banking Group (ANZ).

Technical Analysis

Multiple Doji candlesticks at the monthly top portray the bullish exhaustion but higher low formation questions the sellers. As a result, buyers will seek fresh monthly high beyond 111.70 for entry while the bears could wait for the downside break of 109.00, comprising 50-day and 100-day SMA.


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