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  • USD/JPY defies the late-US session pullback from 107.07.
  • Market sentiment remains sour as EU reacts to the US tariff news, FBI warns on China.
  • Virus updates keep fears of wave 2.0 on the table, IMF again cuts global growth forecasts.
  • Second-tier Japanese data, risk catalysts become crucial for decision making.

USD/JPY recedes from intraday high of 107.15 to 107.06 during the initial Asian session on Thursday. Even so, the quote stretches Wednesday’s pullback moves from 106.39. While the recent declines might be considered as trades wait for the Tokyo open, overall risk-off sentiment has been propelling the quote off-late.

Virus fears, trade war and many more to weigh the risks…

The surge in the hospitalization rate in Texas and California joins rising pandemic numbers from Florida to rekindle the fears that the US is inching closer to become the news epicenter of the coronavirus (COVID-19). This might have backed CGTN to suggest that the US had the largest single-day total of new COVID-19 cases on Wednesday with over 36,000 figures.

Not only the pandemic details but fears of trade wars are also weighing the market sentiment. Trump administration recently considered levying fresh tariffs on $3.1 billion EU/UK goods in an additional attempt to highlight the trade pessimism. While reacting to that, the European Union (EU) leaders marked grim words for the US-EU relations. The US earlier ordered an anti-dumping investigation against the Asian tire exporters while the Sino-American trade deal is still in limbo and offers an extra burden on the risk-tone.

Furthermore, the International Monetary Fund (IMF) joined the league of challenging catalysts. The Washington based institute now expects the global economy to contract by 4.9% in 2020 versus the April month forecast of 3.0%. The key organization also cited the need for further policy measures to combat the virus. Additionally on the negative side were the downbeat comments from the US Federal Bureau of Investigation (FBI) and St. Louis Federal Reserve (Fed) Bank President James Bullard.

Considering the active play of qualitative catalysts, coupled with a lack of major data on the calendar, the market players may keep eyes on the virus and trade updates for near-term direction. It’s worth mentioning that Japan’s All Industry Activity Index for April, prior -3.8%, could decorate the data line ahead of the US Jobless Claims and Durable Goods Orders.

Technical analysis

A clear break above 10-day SMA, at 107.05 now, propels the yen pair towards a 21-day SMA level of 107.63. On the contrary, bears are less likely to enter unless witnessing a downside break below May month’s bottom of 105.99.