USD/JPY holds onto recovery gains above 107.00 amid broad US dollar strength
- USD/JPY extends Friday’s U-turn from 106.59 to probe three-day high.
- Markets keep the risk-off mood amid fears of the virus outbreak 2.0.
- Upbeat comments from the Dallas Fed President Kaplan also added to the USD strength.
- No major data from Japan but COVID-19 headlines will be the key to follow.
USD/JPY takes the bids near 107.50, intraday high of 107.57, during the pre-Tokyo open Asian session on Monday. The yen pair recently benefited from the broad US dollar strength as the market’s risk aversion got a boost after weekend headlines suggested increased fears of the coronavirus (COVID-19) outbreak 2.0. It’s worth mentioning that the US protests and mixed signals from the Fed’s Kaplan also added to the greenback’s strength.
The US, Tokyo register increase in cases, Beijing recalled partial shutdown…
Reuters came out with the news, during the weekend, that suggests record spikes in the new pandemic cases and hospitalizations in the US. The news said, “Alabama reported a record number of new cases for the fourth day in a row on Sunday. Alaska, Arizona, Arkansas, California, Florida, North Carolina, Oklahoma and South Carolina all had record numbers of new cases in the past three days, according to a Reuters tally.”
Elsewhere, Tokyo also reported the highest numbers of the cases since May 05, an increase of 47, whereas Beijing called partial shutdown after cases shot surrounding a major wholesale food market in the Southern Fengtai district.
Looking at the Fed, Bloomberg came out with the expectations of another round of downbeat signals from Federal Reserve Chairman Jerome Powell during his testimony, up for publishing on Tuesday and Wednesday. However, the recent comments from the Dallas Fed President Robert Kaplan reignited the hope of recovery in the employment market while also keeping the yearly Unemployment Rate pessimism.
Other than the virus and the Fed, concerns about the US protests also weighed on the market’s risk-tone sentiment. As a result, S&P 500 futures tanked over 1.5% during the initial hours of trading, currently recovering to 2,990, still down 1.15% on a day.
Although the Japanese calendar has nothing major to offer, risk catalysts are likely to offer an active start to the week. In doing so, the US dollar strength could become a reason for the pair traders to follow.
Technical analysis
50-day SMA near 107.60 guards the pair’s immediate upside. However, an ascending trend line from May 06, currently around 106.65, challenges the pair’s short-term downside.