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  • USD/JPY extends Friday’s recovery moves, recently bounced off intraday low.
  • Market sentiment remains mixed amid covid, reflation woes and geopolitical headlines.
  • Japan prepares to extend virus-led emergency, begins large-scale vaccinations.
  • Fedspeak, BOJ’s Kuroda will be in the spotlight.

USD/JPY picks up bids to 108.95 during the second consecutive positive day, up 0.07% intraday, amid an initial Tokyo trading on Monday. The yen pair benefited from the broad US dollar moves on Friday but the latest strength seems to take clues from the S&P 500 Futures, also ignoring mixed risk catalysts.

S&P 500 Futures print 0.20% intraday gains, reversing the early Asian session losses, whereas Japan’s Nikkei 225 rises 0.66% on a day as Yoshihidi Suga-led government begins large-scale vaccinations in Tokyo and Osaka. It should, however, be noted that the chatters surrounding the extension of the coronavirus (COVID-19) emergency in Tokyo and eight other prefectures beyond the May 31 deadline, cited by Japanese media Yomiuri, probe USD/JPY bulls.

Though, upbeat PMIs and the US dollar strength back the pair buyers. Additionally, airplane hijacking in Belarus and the Sino-American tussles can put safe-haven bids under the US dollar and favor USD/JPY upside as well.

Given the market’s fears over the US Federal Reserve (Fed) tapering, every incoming data and Fed comments will be closely analyzed after a few more of the Fed policymakers joined the line of Dallas Fed President Robert Kaplan. Also important will be BOJ Governor Haruhiko Kuroda’s speech, up for publishing at 11:05 GMT, even as the Japanese central bank is far from tapering.

It’s worth mentioning that the covid headlines and geopolitical chatters could also help direct short-term USD/JPY moves and hence shouldn’t be missed.

Technical analysis

An area between 108.60 and 109.00, comprising 50-day and 21-day EMAs respectively, limit short-term USD/JPY moves. However, buyers remain hopeful as an ascending trend line from January, around 108.80, favor an upside momentum.