USD/JPY pierces 106.00 as optimists keep the reins
- USD/JPY prints two-day winning streak to challenge Friday’s high.
- US-China trade optimism regains market attention after USTR, China’s Liu see progress on the phase one deal
- Chatters concerning Japan’s relaxations on foreigners’ arrival keep the risk-on mood intact despite US health official Fauci’s downbeat comments.
- Receding virus numbers from Australia, US and Tokyo adds to the upbeat sentiment.
USD/JPY takes the bids near 106.00, intraday high of 106.04, as the market in Tokyo opens for Tuesday’s trading. The yen pair extends Monday’s gains despite recent challenges to the earlier risk catalysts. The reason could be traced from the coronavirus (COVID-19) related optimism at home and the market’s refrain from entertaining the pessimists.
Recently, Reuters spread the news that the US Trade Representative Robert Lighthizer and his Chinese counterpart Liu He see progress on phase one trade deal and are committed to taking steps necessary to ensure the success of the agreement. The news helps to challenge the earlier questions to the risk-on mood raised from the US.
The US official Anthony Fauci challenged optimism backed by the Trump administration’s hopes that fast-tracking virus treatment, either via plasma or pushing first right on vaccines. The health authority marked concerns surrounding push for treatments/vaccines while citing “risks in rushing out a vaccine despite the urgent need”, per Reuters.
The reason for the market optimism could also be spotted from the Financial Times (FT) headlines suggesting the Japan is to relax the ban on foreign residents returning to the country. On Monday, Kyodo news said , “Tokyo confirmed an additional 95 coronavirus infections on Monday, marking the lowest daily figure in more than a month”.
It should also be noted that the latest COVID-19 numbers from Australia’s and the US have also portrayed the receding of pandemic and favors the risk-on sentiment. In doing so, the market ignores weakness in the US Chicago Fed National Activity Index as well as cautious momentum ahead of the Jackson Hole Symposium.
Against this backdrop, S&P 500 Futures refreshes the record high with 3,435.88 figures whereas Japan’s Nikkei 225 rises 1.28% to 23,280 by the press time.
Looking forward, a lack of major data/events can push the traders to keep the previous upside bias intact during the Asian session. However, risk catalysts will be the key to watch.
Technical analysis
Only if the pair manages to cross 21-day EMA level of 106.10, it can rise towards a falling trend line from June, at 106.65, otherwise the quote’s pullback to the monthly support line near 105.35 can’t be ruled out.