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  • USD/JPY bounces off the seven-week low.
  • US dollar gains the bid amid trade war fears, Tokyo traders catching up after a long break.
  • Virus updates, US-China headlines will be the key ahead of the busy day post-Asia.

While extending recovery moves from the seven-week-low, USD/JPY takes the bids to 106.25 as Tokyo opens for the first time in a week. The pair’s recent bounce could be attributed to the broad US dollar strength amid trade war fears.

Trade war fears, hopes of US economic restart favor the greenback…

Trade rhetoric from US President Donald Trump, coupled with the signs of another step-in the Hong Kong-China affair, seems to weigh on the market’s risk-tone sentiment off-late. Also weighing on the risks could be the White House statement conveying “frustration and disappointment” from trade relations with China.

To portray the risk-off sentiment, US 10-year Treasury yields drop from three-week high to 0.687%, down 2.6 basis points (bps) whereas Japan’s NIKKEI flashes 0.30% loss to 19,530 amid initial trading.

In addition to the risk aversion wave, the US dollar gains bids from increasing hope of the economic restart after the lockdown. US President Trump recently pushed harder for the wheels to run again as he suggested focusing on post-crisis economic restoration while winding down the coronavirus (COVID-19) task force team.

Even if Japanese traders fail to provide noticeable moves during their week-start trades, virus/trade headlines will be the key for near-term direction. On the economic calendar, BOE-led “Super Thursday”, coupled with the US Jobless Claims, can keep markets active.

Technical analysis

A monthly resistance line, currently around 107.15, becomes an important upside barrier for the buyers. On the contrary, a three-week-old falling trend line, at 106.00 now, quickly followed by March 10 top near 105.90, seems to limit the pair’s immediate declines.