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  • USD/JPY remains depressed near the multi-day low.
  • Trade war fears, downbeat US data exert downside pressure, hopes of economic restart check the bears from time to time.
  • Japan begins the trading week, no major data from Tokyo is on cards.
  • A busy Thursday ahead, BOE, US Jobless Claims will be in focus.

USD/JPY stays on the back foot near the seven-week bottom, flashed on Wednesday, while taking rounds to 106.10 amid the early Asian morning on Thursday.

US-China trade war fears back in motion…

Late on Wednesday, US President Donald Trump raised doubts over China’s performance on the previously agreed trade deal. The Republican leader also said that China may or may not keep the trade deal.

Following that, a statement from the White House expressed “frustration and disappointment” on the US-China relationship whereas US Secretary of State Mike Pompeo signaled to interfere in China-Hong Kong matter, which the dragon nation harshly rejected late in 2019.

The developments reignited trade war fears that once exerted heavy downside pressure on the market’s risk-tone sentiment and could be fierce this time considering the coronavirus (COVID-19) woes.

As a result, Wall Street registered a mildly negative closing despite not a bad start. However, the US 10-year Treasuries rallied five basis points (bps) to 0.709% as the US Treasury Department announced to introduce a 20-year note due to the high demand amid risk-off.

Even so, markets remain mostly sideways awaiting Japanese traders’ return after multiple holidays. Although Tokyo doesn’t have any major data up for publishing, its reaction to the latest risk catalysts will be the key. It should also be noted that the traders’ cautious sentiment ahead of the BOE-led “Super Thursday”, coupled with the US Jobless Claims, can keep markets active as well. Furthermore, Germany has followed the footsteps of Pacific nations and is ready to restart the economy in a phased manner whereas the US and the UK are also on their way to the reopen but constrained by the virus updates. As a result, the pandemic headlines will also be crucial to follow.

Technical analysis

A three-week-old falling trend line, at 106.00 now, quickly followed by March 10 top near 105.90, restrict the pair’s immediate downside, a break of which can recall 105.00 on the charts. Meanwhile, buyers are less likely to return unless witnessing a sustained break of the monthly resistance line, currently around 107.15.