Search ForexCrunch
  • The risk-on mood undermined the safe-haven JPY and prompted short-covering around USD/JPY.
  • Positive news about a potential coronavirus vaccine further boosted the global risk sentiment.
  • A modest pickup in the US bond yields/USD remained supportive of the strong intraday move up.

The USD/JPY pair surged past the 104.00 mark during the mid-European session and refreshed daily tops, around the 104.35-40 region in the last hour.

The pair witnessed some short-covering move on the first day of a new trading week and for now, seems to have stalled its recent bearish trajectory to the lowest level since March 12. The strong intraday move up was supported by the prevalent risk-on environment, which tends to undermine demand for the safe-haven Japanese yen.

The Democratic candidate Joe Biden’s victory in a nail-biting US presidential election helped ease some of the uncertainties. This, along with dovish Fed expectations and upbeat Chinese trade balance data, boosted investors’ appetite for perceived riskier assets, like equities, and weighed on traditional safe-haven assets.

It is worth reporting that the possibility of a split Congress fueled speculations that the Fed might be forced to ease the monetary policy further to support the COVID-hit economy. Meanwhile, the latest leg of a sudden spike over the past hour or so followed the news of a potential vaccine for the highly contagious coronavirus disease.

In a promising development, pharmaceutical giant Pfizer announced this Monday that early analysis of its coronavirus vaccine trial suggested the vaccine was robustly effective in preventing COVID-19. Bulls further took cues from a goodish pickup in the US Treasury bond yields, which extended some support to the US dollar.

Apart from this, possibilities of some short-term trading stops being triggered on a sustained move back above the 104.00 support-turned-resistance further contributed to the momentum. It, however, remains to be seen if the move is supported by any genuine buying or turns out to be a stop run amid absent relevant market-moving economic data.

Technical levels to watch