During Monday's European trading session, the USD/JPY currency pair failed to halt its early day bearish moves and witnessed some further selling near 105.70 level, mainly due to the broad-based U.S. dollar weakness, triggered by the combination of factors. The ongoing impasse over the next round of the U.S. fiscal stimulus and the upbeat market sentiment and the going doubts about the U.S. economic recovery undermined the broad-based U.S. dollar.
The risk-on market sentiment was supported by optimism about the coronavirus vaccine that undermined the safe-haven Japanese yen and helped the USD/JPY currency pair to limits its deeper losses. At this particular time, the USD/JPY currency pair is currently trading at 105.71 and consolidating in the range between 105.69 - 105.94.
Despite the lingering doubts over the U.S. economic recovery and the intensifying tension between the world's two biggest economies, the market players continue to cheer the optimism about the coronavirus treatment. As per the latest report, the use of blood plasma from the recovered patients of coronavirus was confirmed by the U.S. Food & Drug Administration (FDA). In turn, this undermined the safe-haven Japanese yen and helped the currency pair decrease its losses.
Apart from this, the long-lasting impasse over the next round of the U.S. fiscal stimulus also exerted downside pressure on the greenback. The U.S. Congress hasn't yet started discussing the U.S. stimulus package as opposition Democratic Party didn't give any latest clues. House Speaker Nancy Pelosi earlier showed readiness to cut demands in half before stepping back on Friday.
Across the Pond, the market fears concerning Japanese PM Shinzo Abe's health also undermined the JPY and might support the currency pair. As per the latest report, the Yomiuri said that the PM would visit a Tokyo hospital on Monday morning. The update also mentioned PM Abe's more than 7-hour long medical examination conducted last week. Apart from this, the ongoing coronavirus (COVID-19) cases in Tokyo stayed beyond 200 for the 4th continuous day. This, in turn, undermined the JPY and provided some support to the currency pair.
At the USD front, the broad-based U.S. dollar edged lower on the day as the lack of progress over the U.S. aid package continuously destroyed hopes for a quick economic recovery. However, the losses in the U.S. dollar kept the USD/JPY currency pair under pressure. Whereas, the U.S. Dollar Index that tracks the USD against a bucket of other currencies was down to 93.102.
At the US-China front, the tensions between the United States and China rose as Trump suggested the likelihood of decoupling the U.S. economy from China, a major purchaser of U.S. goods. As well as, China expressed their dislike over the American planes flying off the South China Sea. Also challenging the risk-on market sentiment was the news suggesting Huawei's cancellation of orders from suppliers. Whereas, the policymakers from both countries are still not showing any clue over phase one trade deal. However, these lingering Sino-US tensions could cap further upside in the equity market.
Looking forward, the market traders will look forward to the upcoming speech of U.S. Federal Reserve Chairman Jerome Powell at the Jackson Hole symposium on Thursday. The USD moves and coronavirus headlines will also be closely followed as they could play a key role.
Daily Support and Resistance
Pivot Point 105.77
The USD/JPY is trading within a narrow trading range of 105.880 to 15.600 level. Closing of candles outside this range will confirm the violation of the symmetric triangle pattern, which may trigger a sell-off or a bullish trend. Typically symmetric triangle signals indecision among investors; therefore, we should look for selling trends in the USD/JPY below 105.650 and bullish trend over 107.880 level today. Good luck!