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  • USD/JPY stays mildly offers near the intraday low while defying the previous day’s recovery moves.
  • US dollar consolidates the heaviest gains in three weeks amid a light calendar.
  • IMF’s upbeat global forecast favors the shift in risk sentiment while US stimulus deadlock, virus woes occupy the other end.
  • Japan’s Industrial Production, challenges to risk will be in the spotlight.

USD/JPY stays mildly heavy after reversing from 105.62 the previous day, currently at the intraday low of 105.415, down 0.04%, amid an initial hour of Tokyo open. In doing so, the pair seems to follow the little losses of Japan’s benchmark equity index as well as the US dollar’s pullback.

A balanced move between the risk-off and mild optimism…

While fears of a further delay in the US stimulus and the coronavirus (COVID-19) seems to weigh on the market’s trading sentiment, the International Monetary Fund’s (IMF) global economic outlook gives rise to hopes of recovery.

US House Speaker Nancy Pelosi reiterated her dislike for the Republican proposal of COVID-19 stimulus on Tuesday despite citing odds of a sooner solution. Further, Eli Lily joins Johnson and Johnson to halt the vaccine trials

On the other hand, the IMF upwardly revised its global economic forecasts while anticipating -4.4 GDP figures for 2020 versus the previous expectations surrounding -5.2%. It should be noted that Japan’s Prime Minister Yoshihide Suga recently pushed for additional economic stimulus as early as November, per Nikkei.

Against this backdrop, Japan’s Nikkei 225 drops 0.20% in the early hours of trading whereas the S&P 500 Futures and the US 10-year Treasury yields are nursing the previous day’s losses.

Moving on, USD/JPY traders will wait for Japan’s August month Industrial Production figures, expected to remain unchanged at -13.3% YoY, while keeping eyes on the risk factors for immediate direction.

Technical analysis

While 10-day SMA restricts the immediate upside of USD/JPY around 105.60, 21-day SMA near 105.38 and an ascending trend line from October 02 limits the pair’s short-term declines above 105.30.