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  • USD/JPY recovers after dropping to a fresh monthly low of 106.57.
  • Wall Street looks to open sharply higher following Thursday’s plunge.
  • US Dollar Index stays relatively calm below 97.00.

The USD/JPY pair closed the first four days of the week in the negative territory and lost nearly 300 pips during that period. After touching its lowest level in a month at 106.57 on Thursday, the pair reversed its direction and was last seen gaining 0.5% on the day at 107.38.

With the flight-to-safety remaining as the primary driver of the financial markets, the JPY continued to gather strength against its peers. The 10-year US Treasury bond yield lost nearly 30% from Monday to Thursday to reflect the risk-off environment. Additionally, Wall Street’s main indexes suffered heavy losses on resurfacing worries over a second coronavirus wave hitting the US economy.

Focus shifts to Wall Street

Although the greenback outperformed its risk-sensitive rivals such as the EUR, GBP and the AUD, it struggled to remain resilient against the JPY. On Friday, the market mood seems to have improved modestly but risky high-yielding assets are likely to remain fragile in the near-term. 

Later in the session, the University of Michigan’s Consumer Sentiment Index will be looked upon for fresh impetus. Investors will keep a close eye on the performance of major equity indexes in the US as well.

Meanwhile, the Japanese parliament announced on Friday that it approved an extra budget worth JPY31.9 trillion to fund the coronavirus stimulus package. Nevertheless, the market reaction to this development was muted.

Technical levels to watch for

 

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