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  • USD/JPY sellers attack intraday low amid fears of the virus-led activity restrictions in Japan.
  • Tokyo and 3 surrounding prefectures can witness emergency as early as this week.
  • Japan’s Jibun Bank Manufacturing PMI overcomes manufacturing contraction for the first time since early 2019.
  • S&P 500 Futures drop 0.15%, Nikkei 225 down over 1.0% amid cautious sentiment.

USD/JPY bounces off intraday low to 103.07, down 0.18% on a day, amid the initial hour of Tokyo open on Monday. The yen pair recently slumped after chatters over the worsening coronavirus (COVID-19) conditions in Japan leading towards emergencies. Also weighing on the pair could be the multi-month high of Jibun Bank Manufacturing PMI and the US dollar weakness.

Early in Asia, Japan’s Kyodo News came out with the headlines suggesting the government’s rush to experts while asking whether to declare a state of emergency in Tokyo and neighboring prefectures hit by surging coronavirus cases. “Japan is struggling to curb coronavirus infections with more than 3,100 new cases confirmed on Sunday. Tokyo reported 816 new infections, bringing the cumulative total to 62,590, by far the largest among the country’s 47 prefectures,” said the news further.

Also weighing on the risks could be Reuters’ headline, quoting China’s securities regulator, while saying, New York Stock Exchange (NYSE) plans to delist three Chinese telecom firms are “political” and that the impact will be “limited”. It’s worth mentioning that the overcoming of Brexit and US covid aid package hurdles can renew the US-China tussle story for risk-watchers.

Furthermore, upbeat prints by Japan’s Jibun Bank Manufacturing PMI for December also favored USD/JPY sellers. The second reading of the Asian major’s manufacturing gauge not only crossed the initial forecast of 49.7 but marked the expansionary figure of 50.00 for the first time in almost two years.

Against this backdrop, S&P 500 Futures step back from the record top around the mid-3,700s while Japan’s Nikkei 225 drop 1.22% by press time.

Moving on, risk catalysts will be the key while second reading of the monthly activity data will also be important to watch.

Technical analysis

Although USD/JPY buyers are less likely to return unless witnessing an upside break of an eight-week-old falling trend line, at 103.70 now, the multi-month low flashed in December around 102.87 can restrict the quote’s immediate declines.