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USD/JPY Choppy Session Continues - Brace for a Breakout! 


During Thursday's European trading session, the USD/JPY currency pair successfully stopped its previous session losing streak and remained confined in a range above the 107.00 mark. However, the currency pair was trading with a mild bullish bias mainly due to the risk-on market sentiment triggered by incoming positive economic data, which undermined the safe-haven Japanese yen and extended modest support to the USD/JPY pair.

At this moment, the USD/JPY currency pair is currently trading at 107.27 and consolidating in the range between 107.19 - 107.36. However, the traders seem cautious to place any strong position ahead of US key data. The United States has been considered the epicenter of the virus. The US cases crossed a total of 3.0 million. Moreover, the latest update from the Texas Health Department suggested new cases increase by 9,979 to 220,564 on Wednesday, the biggest daily increase since pandemic started.

Despite concerns about the ever-increasing coronavirus cases worldwide, the incoming positive economic data continuously fueled expectations for a V-shaped global economic recovery that consistently provided support to the upbeat global risk sentiment and the recent rally in the equity markets.

However, the upbeat sentiment was supported by the hopes about the coronavirus vaccine as Dr. Anthony Fauci said Phase 3 vaccine trials may begin at the end of July, and that he is cautiously optimistic for a vaccine by year-end. Researchers around the world are developing more than 145 vaccines against coronavirus. Whereas, there are currently 21 vaccines in human trials as per the New York Times vaccine tracker.

As a result, the broad-based US dollar reported losses on the day, possibly due to the modest upbeat trading sentiment backed by the multiple factors that boosted the market sentiment. The intensified concerns over a second economic lockdown in the US due to the increasing number of confirmed coronavirus cases and tension between the United States and China restricted the market's risk-on tone. They kept the currency pair into a limited range.

It will now be prudent to see if the currency pair can attract any buying interest at lower levels or weakens further below the 107.00 mark to confirm a near-term bearish break. However, the bearish moves might extend further towards the next major support near the 106.50-45 region. The market traders look forward to the data of the US weekly jobless claims, which is expected 1375K against 1427K. The traders will keep their focus on the virus updates and news concerning China.

Daily Support and Resistance

S1 106.52

S2 106.98

S3 107.17

Pivot Point 107.45

R1 107.64

R2 107.91

R3 108.38

The USD/JPY pair is trading sideways, holding mostly above an immediate double bottom support area of 107.220. Closing of candles above this level can drive the buying trend until the next resistance level of 107.650. While the bearish breakout of 107.220 level can lead the USD/JPY pair towards 106.450 level. The RSI and 50 EMA support selling, but we should wait for a bearish breakout of 107.220 level before taking any sell trade. Good luck!

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