USD/JPY: Mildly offered around 108.00 even as Nikkei 225 gains over 1.0%

  • USD/JPY struggles to keep the previous day’s bounce from seven-week low.
  • COVID-19 conditions in Asia joins US stimulus deadlock and geopolitical-trade headlines to challenge previous risk-on mood.
  • Pre-ECB cautious sentiment adds to the upside filters.

USD/JPY sellers attack 108.00 during the fresh pullback from the intraday top, down 0.10% on a day, amid the initial hour of Tokyo open on Thursday. The downside move defies corrective pullback in Japan’s Nikkei 225 amid fresh challenges, mainly from the coronavirus (COVID-19) frontier.

Other than the looming risks over the third emergency in Tokyo and surrounding prefectures, India’s all-time high infections, recently above 300K, also test the sentiment. On the same line were chatters over the need for the covid vaccine jab.

Additionally, Global Times’ (GT) indirect hint over Beijing’s upcoming punitive measures over Australia joins the league of the US-China and the Russia-Ukraine tussles to weigh on the mood.

It’s worth mentioning that the deadlock over US President Joe Biden’s $2.25 trillion stimulus and the cautious sentiment ahead of the European Central Bank (ECB) monetary policy meeting is an extra burden on the risks.

On Wednesday, market sentiment cheered the Bank of Canada’s (BOC) 25% reduction in the weekly bond-purchase target as well as chatters over the US economic recovery.

Read: Fresh Aussie-China tussle, US infrastructure spending bill talks and covid woes can weigh on sentiment

Against this backdrop, Japan’s Nikkei 225 gains 1.25% but S&P 500 Futures drop 0.20% by the press time.

Looking forward, the ECB meeting will be the key event of the day while the US figures on weekly Jobless Claims and monthly data on housing, as well as Chicago Fed National Activity Index, will direct near-term USD/JPY moves. Also, the Japanese government is yet to announce the emergency decision, which will be observed closely, whereas the US decision over Johnson & Johnson vaccines, up for Friday, may as well be crucial to follow.

Read: European Central Bank Preview: Five reasons for Lagarde to lift the euro

Technical analysis

Wednesday’s Doji near multi-day low backs the corrective pullback towards crossing 50-day SMA around 108.20. However, an ascending trend line from March 10, previous support near 108.55, could challenge the quote’s further recoveries.


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