Search ForexCrunch
  • USD/JPY extends recovery from 109.08, prints four-day winning streak.
  • Market’s cautious sentiment during the pre-NFP period, fresh US-China tension weigh on the pair.
  • Second-tier Japanese data, US-China headlines might offer intermediate trade direction.

USD/JPY bounces off the intraday low of 109.08 to 109.20 amid the pre-Tokyo open Asian session on Friday. Market’s risk-tone struggles for direction following the latest headlines suggesting fresh tension between the US and China. Also dimming the previous optimism could be the traders’ cautious moves ahead of the pre-NFP session.

The return of US-China tension during pre-NFP trading lull…

Recent comments criticizing Chinese equities and trade practises by US Secretary of State Mike Pompeo and President Donald Trump challenges the market’s earlier optimism backed by the hopes of economic recovery. While US Secretary Pompeo praises Nasdaq’s move to disappoint Chinese equities’ listing on the American index, President Trump marked disappointment from China’s failures to keep its promises.

It should also be noted that the Asian major said it is continuing its purchase of the US Soybeans as per the phase-one deal. This might be the reason behind US Trade Representative Robert Lighthizer’s “very good” feeling about phase one trade agreement with China.

Other than the US-China noise, calls of further stimulus from the global central banks got an additional boost after the European Central Bank (ECB) announced more than expected 500 billion Euro of addition to its Pandemic Emergency Purchase Programme (PEPP).

Further, the depleting cases of the coronavirus (COVID-19) and gradual reopening of economies in the West added to the risk-tone the previous day.

Having said that, the US 10-year Treasury yields added over six basis points (bps) to rise to the late-March high of 0.82%. However, Wall Street and S&P 500 Futures fail to keep up the positive mood with mildly negative prints.

Looking forward, Japan’s April month Overall Household Spending and the preliminary reading of Leading Economic Index, expected -15.4% and 80.5 respectively versus -6% and 84.7 priors in that order, can offer intermediate moves to the pair. Though, the major attention will be on the May month US employment data as well as the US-China news for fresh impulse.

Technical analysis

Unless breaking below 200-day SMA level of 108.40, USD/PY can stop its run-up to challenge April month high near 109.40.