- USD/JPY stretches the late-US session pullback moves from 106.96.
- US tries to increase hardships for Chinese media, American Treasury Secretary Mnuchin signals decoupling with China.
- Virus woes loom amid the Sino-American tussle, Jibun Bank Manufacturing PMI can offer immediate direction.
USD/JPY remains soft around 106.90 during the pre-Tokyo open Asian session on Tuesday. The yen pair began the week on a positive note while snapping the five-day losing streak. Though, the recent challenges to the market’s optimism, mainly triggered by the US, seem to have poured cold water on the face of the buyers.
US-China tension jumps back to weigh on the mood…
In addition to the news from Reuters suggesting the Trump administration’s efforts to tame Chinese media, recent comments from US Treasury Secretary Steve Mnuchin also rekindled the tussle among the global leaders. The US is adding four more China news agencies, including the state-backed Global Times, to the list of already five entities from Beijing underlined in February. The action terms the outlets as foreign embassies, which in turn will require information on personnel rosters and real-estate holdings to be informed to the US State Department. Additionally, US Treasury Secretary Mnuchin said that there may be a time when we have China decoupling.
While the aforementioned news should ideally weigh on the market’s risk-tone sentiment, the previous day’s upbeat performance isn’t over yet. Monday’s downbeat coronavirus (COVID-19) figures from China, as well as US President Donald Trump’s refrain from sanctions due to the Xinjiang issues, offered a bit of relief to the global markets.
In doing so, the mixed US data and a surge in the cases from the southern states of America seems to have mostly been ignored. Additionally brightening the mood could be the updates on the $1 trillion infrastructure package from the US.
Amid all these catalysts, Wall Street closed the first trading day of the week on a positive side whereas the US 10-year Treasury yields also gained to end the day around 0.70%. Recently, S&P 500 Futures seems to struggle with the previous risk-on sentiment while taking rounds to 3,110 as we write.
Although the return of the US-China tussle and virus updates might keep the driver’s seat, Japan’s June month Jibun Bank Manufacturing PMI data will also be important to watch immediate direction. The activity gauge suggests a soft print of the outcome from 38.4 to 36.9.
Technical analysis
A seven-week-old ascending trend line near 106.70 offers immediate support to the pair ahead of the monthly low near 106.55. On the upside, 50-day SMA surrounding 107.45 becomes the key short-term resistance to watch during the pullback moves, which are less anticipated considering the pair’s recent sluggish performance.
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