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  • USD/JPY buyers attack the upper band of a short-term trading range between 105.75 and 105.95.
  • The final reading of Japan’s GDP for the first quarter (Q1) confirms -0.6% figures QoQ.
  • Risk dwindles amid the coronavirus woes, US policymakers’ inability to offer COVID-19 relief plan.
  • Early-month PMIs can offer immediate direction but virus headlines, news concerning the US aid package will be the key.

USD/JPY stays modestly changed while taking rounds to 105.90 as markets in Tokyo opens for trading on Monday. The pair recently picked up the bids after the final readings of Japan’s Q1 GDP data while also concentrating on the risk aversion wave.

Japan’s first quarter (Q1) GDP confirmed 0.6% QoQ and 2.2% annualized contractions during their latest release. The data also asserts the policymakers’ downward revision to FY2020 read GDP forecasts.

Read: Slight beat for Japan Q1 revised real GDP -0.6% QoQ (2nd prelim -0.6%, Reuters poll -0.7%)

Risks remain as the key…

Despite downbeat data, USD/JPY fails to rise much as risk-off mood continues to occupy the driver’s seat. Among the main catalysts, the US policymakers’ inability to provide details of fiscal plan and the coronavirus (COVID-19) crisis remain as important catalysts.

The US Senate members failed to offer any details on the unemployment claims benefit even if the relief measure expired on Friday. Additionally, the policymakers also couldn’t agree over the plan to combat the economic impacts of the pandemic. While the Democrats are ready to offer $3.5 trillion help, Republicans are not favoring anything more than $1.0 trillion as the much-awaited aid package. Recently, House Speaker Nancy Pelosi said US President Trump standing in way of enhanced unemployment benefits. On the other hand, US Treasury Secretary Steve Mnuchin mentioned during the ABC interview that we need to be careful about not piling on enormous debt for future generations.

Talking about the virus, new cases continue to rise in Australia’s Victoria while Tokyo marks a bit of relief as far as the latest data is concerned. “Tokyo confirmed 292 new coronavirus infections on Sunday, after cases rose by more than 400 in the past two days, public broadcaster NHK said,” per Reuters.

The US dollar witnessed month-end trade adjustments on Friday where it surged across the board while edging off over two-year low.

Markets’ risk-tone sentiment remains sluggish as S&P 500 Futures struggle around 3,260 and Japan’s Nikkei 225 gains over 1.0% but the US 10-year Treasury yields remain on the back foot near 0.536%.

Looking forward, traders will keep eyes on the month-start PMI data from China and the US for immediate direction. Though, major attention will be on the risk catalysts that suggest further weakness in the market’s optimism.

Technical analysis

Unless breaking June month’s low near 106.10, which holds the key to the pair’s rise towards a two-month-old resistance line near 106.70, bears are less likely to stop targeting 104.00.