USD/JPY stays heavy near 4- ½ month low on Tokyo open

• USD/JPY prints four-day losing streak while extending pullback from 105.45.
• Japan’s Corporate Service Private Index rose past-0.5% forecast to 0.8% in June.
• Escalations in the geopolitical fears add to the pair’s weakness.
• Risk catalysts remain in the driver’s seat, US second-tier data also join the watch-list.

USD/JPY drops to 105.22, down 0.15% on a day, as traders in kick-start Tuesday with the same bearish mood. While US dollar weakness underpins the yen pair’s recent weakness since late last week, better than forecast Japanese data and signals suggesting an increase in geopolitical risk also weigh on the quote.

Japan’s Corporate Service Private Index (YoY) reprints 0.8% figures in June versus market consensus of a 0.5% increase in data.

Geopolitics joins the virus woes and US fiscal package uncertainty…

Be it two blasts in Iraq or North Korean leader’s praise for the nuclear weapons, not to forget the increasing US aerial presence in the South China Sea, everything suggests that the era of geopolitical risks are back. Further, news that the Japanese LDP group to seek restrictions on Chinese apps also adds to the global fights among the key players. These catalysts add weakness to the already lingering pair amid the coronavirus (COVID-19) crisis.

Also pleasing the bears is the US dollar’s weakness. The greenback gauge, US dollar Index (DX), dropped to the two-year low on Monday as markets seem disappointed by the escalating pandemic numbers and an absence of clear direction concerning the much-awaited fiscal package from the US. It’s worth mentioning that the lack of unidirectional data from the world’s largest economy also increases the Japanese yen’s safe-haven demand.

It should, however, be noted that the global equities are mildly bid, S&P 500 Futures up 0.20% to 3,239 by the press time, amid hopes of further stimulus.

Considering the lack of major data/events from Japan, the pair traders will have to look for qualitative risk catalysts for immediate direction ahead of the US session. In doing so, China and coronavirus could be the keywords.

Technical analysis

With the oversold RSI conditions challenging the pair’s further weakness past-105.00 support, bulls will re-enter if the quote regains 106.00.