- USD/JPY retraces the biggest losses in two months from 104.34.
- S&P 500 Futures, Nikkei 225 drop around 0.50%, stocks in Pacific are also down.
- Virus woes battle US stimulus hopes, Brexit optimism.
- Japan’s All Industry Activity Index, risk catalysts will be the key to watch.
USD/JPY refreshes intraday high to 104.70, currently around 104.65, as markets in Tokyo open for Thursday’s trading. In doing so, the pair consolidates the previous day’s losses, the biggest since late-August, while also recovering from the lowest since September 21. However, a lack of clear signals to extend the earlier risk-on mood seems to probe traders amid a light calendar in Asia.
Geopolitical fears, virus worries combat stimulus optimism…
The latest coronavirus (COVID-19) updates from the US and Australia suggest that the pandemic regains momentum outside the epicenter Europe, which in turn negatively affects the market’s optimism, portrayed yesterday, based on hopes of the American relief package. Spain crossed the one million mark for the cases whereas over 50% of states in the US registered a monthly high in new cases. Further, Australia’s Victoria also battles the 14-day average while flashing five new cases for the previous day.
The US Federal Bureau of Investigations (FBI) recently came out with a report that alleges Iran and Russia for meddling with the presidential elections, up for the next month.
Other than the fears of virus and geopolitical tensions, hopes of the soft Brexit are also getting reassessed amid the vast difference between the UK and the European Union’s (EU) demands on the thorny issues.
Furthermore, US President Donald Trump’s blame on the Republicans, for the delay in the much-awaited stimulus, as well as Senate Majority Leader Mitch McConnell’s lack of readiness for an aid package before the elections also probe the earlier boost to the risk tone.
As a result, S&P 500 Futures and Japan’s Nikkei join the Asia-Pacific stocks to mark losses below 1.0% whereas the US dollar index (DXY) also bounces off the seven-week low.
Moving on, Japan’s All Industry Activity Index for August, prior 1.3%, can offer immediate directions to the pair ahead of the US Initial Jobless Claims for the week ended on October 16, expected 860K versus 898K previous. However, headlines affecting the market’s mood will be the key to watch.
Technical analysis
Although an upside clearance of 105.00 can extend short-term recoveries, bulls are less likely to return unless witnessing a clear break of the falling trend line from June 30, at 105.85 now.
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