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USD/JPY Recovered Slightly & Trades Below Mid-108.00 - Risk-On Market Sentiment Plays! 


During Thursday's Asian trading session, the USD/JPY currency pair succeeded in stopping its previous day losing streak and recovered slightly from the three-day low to 107.49. However, the currency pair trading with a mild bullish bias mainly due to the risk-on market sentiment triggered by the multiple factors which undermined the safe-haven Japanese yen and provided a modest lift to the USD/JPY pair.

On the other hand, the broad-based U.S. dollar weakness in the wake of risk-on market sentiment is one of the significant events that keep a lid any further gains in the USD/JPY pair, at least for now. Currently, the USD/JPY currency pair is currently trading at 107.42 and consolidates in the range between the 107.33 - 107.56. However, the traders seem cautious to place any strong position ahead of key U.S. jobs report for June.

It should be noted that the Biopharmaceutical New Technologies (BioNTech) announced yesterday that the coronavirus vaccine – co-developed with the U.S. pharmaceutical giant Pfizer had shown positive results triggered by the robust immune response in the early stage of human trials. However, this positive news remained supportive of the positive tone around the equity markets.

Moreover, the reason behind the risk-on market sentiment could be attributed to the better than forecast activity numbers from China, the U.S., and the Eurozone. The signals for further stimulus also exerted some positive impact on the risk sentiment.

As in result, the broad-based U.S. dollar erased its previous session gains and edged lower on the day ahead of key U.S. data. However, the reason for the losses in the greenback could be attributed to the modest upbeat trading sentiment backed by the optimism surrounding a potential Covid-19 vaccine as well as robust economic data. Let me remind you; investors have treated the U.S. dollar as a haven currency.

Apart from this, the intensified concerns over a second economic lockdown in the U.S. due to the surging number of confirmed coronavirus cases and tension between the United States and China turned out to be key factors that kept a lid on market's risk-on sentiment. As per the latest report, the U.S. daily coronavirus cases crossed over 48,000 figures on Wednesday, registering the highest increase since the pandemic started.

At the US-China front, the Dragon Nation recently introduced some terms for the U.S. media working on their homeland, mainly after the United States decided to impose sanctions on China in the wake of Hong Kong security law, which seems to offer the latest challenges to the market's risk-tone sentiment.

Daily Support and Resistance

S1 106.81

S2 107.16

S3 107.31

Pivot Point 107.51

R1 107.65

R2 107.85

R3 108.2

The USD/JPY is supported over 107.320, and closing candles above the support level suggests odds of a bullish trend in the USD/JPY pair. The USD/JPY pair has formed an upward channel, which is most likely to support the Japanese at least until the release of U.S. NFP figures. On the higher side, we can expect USD/JPY to soar until 108.148. The RSI and 50 EMA are both in support of buying. Let's consider taking bullish trades over 107.320 level to capture quick 40 pips in USD/JPY. Good luck!

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