Today in the early European trading session, the USD/JPY currency pair failed to continue its Asian session early gains. They dropped below the mid-108.00 level mainly due to the risk-off market sentiment backed by the fears of the second wave of coronavirus, which eventually underpinned the safe-haven Japanese yen and contributed to the currency pair declines. As well as, the Japanese yen gains could also be associated with the upbeat Japan data.
Besides this, the bullish sentiment surrounding the broad-based U.S. dollar helped the currency pair to limit any deeper losses. The USD/JPY currency pair is trading at 107.48 and consolidating in the range between 107.42 - 107.71.
However, the worries over the resurgence of the Covid-19 virus exerted downside pressure on the risk sentiment and underpinned the safe-haven Japanese yen. As per the latest report, there are almost 11.8 million COVID-19 cases globally as of July 8. Whereas, the U.S. coronavirus cases increased to over 3 million in total so far, the world's largest outbreak as per the report. In the meantime, the cases in Texas up by more than 10,000 in just one day. Whereas Tokyo reported a rise above 100 numbers for over the sixth day in a row.
The risk-off market sentiment was further bolstered by Australia's announcement about re-imposing lockdown restrictions for Melbourne and Victoria Melbourne and Victoria. However, the possibility of renewed lockdown depressed prospects for a sharp V-shaped global economic recovery and kept investors cautious. In the meantime, Australian Prime Minister (PM) Scot Morrison hinted further restrictions on the travel while talking about his concerns over the Hong Kong issue, which also favoring the risk-off mood.
Apart from the Virus woes, the US-China dispute remains on the cards as the U.S. Secretary of State Mike Pompeo recently imposed visa restrictions for some Chinese officials over Tibet. Moreover, the dragon nation keeps its strong stand against American and the U.K. concerning Huawei's ban and fighting against the Hong Kong security law.
At the USD front, the broad-based U.S. dollar edged higher in early European trade as the safe-haven currency remains in demand mainly due to concerns about the mounting coronavirus cases. However, the U.S. dollar gains kept a lid on any additional losses in the currency pair. Whereas, the U.S. Dollar Index that tracks the greenback against a basket of other currencies gained 0.06% to 96.895 by 12:09 AM ET (5:09 AM GMT).
Looking forward, the market participants will keep their eyes on the trade/virus updates due to the lack of major economic data to be published today. As well as, the sentiment on the Asian indices and USD dynamics will be closely followed for the pair's next directions.
Daily Support and Resistance
S1 106.69
S2 107.12
S3 107.34
Pivot Point 107.56
R1 107.78
R2 108
R3 108.44
The USD/JPY is trading at 107.560 level, holding above a solid support level of 107.250. On the higher side, the next resistance is expected to be found around 108.150 level. The 50 periods EMA supports the pair and suggests bullish bias along with the RSI, which also stays over 50 mark. Today we should consider taking bullish trades over 107.400 level to target 107.800 and 108.150 level. Good luck!