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  • USD/JPY may have run its course on the upside as price continues to bleed out. 
  • US dollar sinking across the board as investors get behind the risk-on sentiment. 

USD/JPY is currently trading at traded at 107.35 within a tight range in Asia of a handful of pips.

Overnight, the pair was choppy between the 107.26 to 107.77 range but was slightly lower on a weaker greenback despite the US ISM non-manufacturing index jumped back into expansionary territory. 

The US dollar fell against all G10 currencies, while the US 2-year treasury yields were stuck around 0.16% and the 10-year yield roundtripped from 0.68% to 0.71% before dropping again. 

All in all, it was a positive risk tone in Asia that continued throughout European and US trading. Investors are cheering positive data releases, reflected in global stock prices. 

The Nasdaq made a new record high. More on this here: Wall Street Close: US stocks surge and Nasdaq powers to record high

Another data beat

US June non-manufacturing ISM beat estimates, surging to 57.1 (vs 50.2 est, prior 45.4) for the highest reading since February which has mirrored the improvement seen in the manufacturing index as the economy has reopened.

New orders jumped to 61.6 from 41.9 and production rose to 66.0 from 41.0. Employment remains in contractionary territory, but lifted to 43.1 from 31.8. Looking forward, questions remain over whether the pace of recovery can be maintained with case numbers continuing to lift,

analysts at ANZ Bank explained. 

Covid-19 complacency

Investors continue to cheer signs of economic recovery and are, so far, content on the measures taken up by the authorities.

Global governments are no longer going to impose widespread lockdowns, preferring instead to contain the outbreaks at the regional or local levels.

The latest updates come from the transmission rate in the US state of New Jersey rising to the highest level in 10 weeks. 

“I see storm clouds on the horizon,” Gov. Andrew Cuomo said last Wednesday as he announced indoor dining New York City was postponed indefinitely. 

Today, he warned that “this is a warning sign”.  

  • US COVID-19 storm clouds, transmission rate on the rise, concerns over airborne spread

  • US Covid-19 data (July 6) update: US cases rise 2.0% v 7-day avg. 1.8%

Meanwhile, the Dow Jones had its best quarter since 1987 and the Nasdaq hit another record high.

Investors are banking on the Federal Reserve to do more and continue to do whatever it takes. However, it is unknown to the markets just how far will the Fed go to support the economy?

Perhaps markets will get a reality check should the virus continue to spread faster than how the Fed can print money. 

Meanwhile, looking ahead, for the day, the Reserve Bank of Australia will be the main event.

In the US session, we will have US JOLTS job openings which have been primed to continue its descent lower from 5046k in April to 4800k in May. we will also have FOMC members Daly and Barkin will also speaking. 

USD/JPY outlook

  • USD/JPY Forecast: At risk of extending the decline

USD/JPY levels