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  • USD/JPY built on its goodish intraday bounce from sub-106.00 levels, or multi-week tops.
  • The risk-on mood weighed on the safe-haven JPY and prompted some short-covering move.
  • A modest pickup in the USD demand remained support; US-China spat likely to cap gains.

The USD/JPY pair continued scaling higher through the mid-European session and climbed further beyond mid-106.00s or fresh daily tops in the last hour.

The pair witnessed some intraday short-covering move on Thursday and for now, seems to have snapped four consecutive days of losing streak amid receding demand for the safe-haven Japanese yen.

Thursday’s better-than-expected Chinese export data raised hopes of a prompt recovery for the world’s second-largest economy from the coronavirus-induced lockdowns and boosted investors’ confidence.

This, in turn, triggered a goodish rally in the global equity markets, which weighed on traditional safe-haven currency and prompted some aggressive intraday short-covering move for the USD/JPY.

The pair has now moved closer to the overnight swing high and was further supported by a modest pickup in the US dollar demand, despite a negative tone surrounding the US Treasury bond yields.

It, however, remains to be seen if the pair is able to capitalize on its intraday recovery from sub-106.00 levels (multi-week lows) or meets with some fresh supply at higher levels amid worsening US-China relations.

It is worth recalling that the US President Donald Trump has threatened to impose fresh tariffs on Chinese goods in retaliation to its mishandling of the virus outbreak at the initial stage.

This comes on the back of a US-China spat over the origin of the coronavirus, which might eventually turn out to be a key factor capping any strong gains for the USD/JPY pair, at least for now.

Moving ahead, market participants now look forward to the release of the US Initial Weekly Jobless Claims data, which might influence the USD price dynamics and provide some trading impetus.

Technical levels to watch