- USD/JPY holds onto recovery from 107.00, aims for the recent peak of 107.50.
- Fed’s announcement to buy wide range of corporate bonds recently underpinned the market’s risk sentiment.
- Fears of coronavirus outbreak 2.0 earlier dragged the quote.
- BOJ is likely to keep the monetary policy unchanged, any surprises could be welcomed with notable moves.
USD/JPY takes rounds to 107.40 at the start of Tuesday’s Asian session. In doing so, the yen pair carries the bounce off 107.00 but stays below the recent peak of 107.50. It’s worth mentioning that the mixed sentiment surrounding the coronavirus (COVID-19) outbreak in the US, China and Tokyo weighed on the pair at the week’s start. Though, the Fed’s announcement concerning its bond-buying activity triggered the risk-on sentiment off-late. It should, however, be noted that the pair traders’ optimism is confined by the upcoming BOJ meeting.
Shift in risks keeps USD/JPY unchanged…
Despite swinging back and forth, USD/JPY closed Monday with no major changes on the intraday, thanks to the shift in the market’s risk-tone sentiment.
The pair initially dropped after news of a surge in the pandemic numbers from some of the US states, Beijing and Tokyo took rounds. The momentum gained additional support with Beijing canceling some press conferences and recalling a partial lockdown in the Southern Fengtai district of China.
However, the markets turned upside after the US Federal Reserve announced that updates to the Secondary Market Corporate Credit Facility (SMCCF), which will begin buying a broad and diversified portfolio of corporate bonds to support market liquidity and the availability of credit for large employers.
The move helped Wall Street to close the day with mild gains whereas the US 10-year Treasury yields also recovered earlier losses and ended Monday with a rise of two basis points to 0.72%.
It should also be noted that the market talks around the US Secretary of State Mike Pompeo’s meeting with a Chinese delegation in Hawaii during the week offered background music to the recent market optimism. Additionally supporting the risk-on mood could be the upbeat comments from the White House Adviser Larry Kudlow in his latest CNBC interview that favors the hopes of V-shaped recovery.
Looking forward, the BOJ’s monetary policy meeting, at 03:00 AM GMT, followed by Governor Haruhiko Kuroda’s press conference at 06:00 AM GMT, becomes the main event of the day. Although the Japanese central bank isn’t expected to offer any surprises, the Governor’s tone and comments relating to the latest support for the private firms by the BOJ could be observed closely for immediate direction. Other than the BOJ, risk catalysts will keep directing the pair whereas the US Retail Sales and Fed Chairman Jerome Powell’s testimony could play their roles afterward.
Technical analysis
A confluence of 21 and 50-day EMA around 107.80 makes it the short-term key upside barrier. Meanwhile, an ascending trend line from March 16, around 106.65 now, restricts the pair’s immediate downside.
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