Search ForexCrunch
  • USD/JPY stays firmer after Q1 2020 Japan GDP.
  • Fed’s Powell defies the use of negative rates despite flaunting the central bank’s ammunition power.
  • US-China tussle, virus update weigh on the market’s risk-tone, Powell’s cautious optimism pleases the risks off-late.
  • Virus/trade updates will entertain markets amid a light calendar day.

USD/JPY takes the bids near 107.25 as the Tokyo market opens for trading after Japan’s Q1 GDP release on Monday. The yen pair seems to have ignored the upbeat Japanese readings amid a slightly better risk-tone sentiment. The reason could be traced from the Fed Chair Jerome Powell’s comments during the US TV interview called “60 minutes”.

The preliminary readings of Japan’s first-quarter 2020 GDP shrank 0.9% versus the median forecast for a 1.2% decline in QoQ.

Read: Japan Q1 GDP marks 2nd straight quarter of contraction

Fed Chair Powell ruled out the risks of the US entering into a second great depression while showing readiness to act. The Fed policymaker also cited the risks of the Unemployment Rate hitting 20-25%. The central banker additionally said that the economy can start getting better fairly soon but fill recovery will require restoration of confidence.

Read: Fed’s Powell: Fed is not out of ammunition, can do more if required – 60 Minutes interview

Other than the Fed Chair’s cautiously optimistic words, US President Donald Trump’s praise to the recovery from the virus spread also seems to contribute towards risk-on sentiment.

That said, S&P 500 Futures register 0.7% gains to 2,865 whereas Japan’s NIKKEI marks 0.20% gains to 20,070 during the initial few minutes of the day’s opening trades.

Earlier in Asia, markets risk sentiment remained sluggish as the US and China engaged in a war of words. While US President Donald Trump said that China could have stopped the virus outbreak, Global Times’ Editor Hu Xijin called the dragon nation to develop its nuclear arsenal. The Chinese media person seemed to have observed President Trump’s last week remarks over the preparations for the “super-duper” missile.

Moving on, a light economic calendar can keep US-China headlines, as well as virus updates, as the key for the near-term direction.

Technical analysis

Buyers will hesitate to enter unless breaking 50-day EMA, currently near 107.65, which in turn highlights the risks of witnessing monthly low near 105.99 back to the chart.