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It is a very thin market out there today with the Easter holidays, with most of the major markets out on holiday. USD/JPY is subsequently taking a dive and testing the 108 figure with a low of 107.99 made, falling from a high of 108.52.

DXY lost ground vs its G10 peers on Friday and the yen is picking up the flack, taking advantage of risk-off market tones pertaining to the continuing threat and spread of COVID-19. The faders out there will be looking for 108.50 to hold on pullbacks s the price struggles to maintain traction above it and beyond 109 the figure. At the time of writing, USD/JPY is trading at 108.02.

Risk-off ones and volatility here to stay

Meanwhile, there was a focus on OPEC+ today with a production cut finally agreed. More on that here, but considering COVID-19 and the fact that the production deal doesn’t take effect until May 1, there is still plenty of time for bears to lay into bid considering OPEC+ countries could still continue to flood the market for another few weeks while raw demand for oil and energy falls away. 

“The balance of risks rests to the downside as the unprecedented demand shock and swelling inventories are unlikely to be offset by even a 10m bpd curtailment,”

analysts at TD Securities explained. 

The overall levels of volatility in the markets are likely to keep the US dollar underpinned which could leave the yen vulnerable longer term, especially should COVID-19 in Japan continue to spread following a sudden spike in infections since the Tokyo Olympics were postponed till next year. A major concern is a way in which the Japanese are managing the outbreak with the government continuing to refuse to face up to the magnitude of the outbreak, committing Japan to a ‘unique’ and highly-risky approach that is based on a certain ‘cluster infection’ theory.

USD/JPY levels