The USD/JPY currency pair broke its previous session consolidation range near 106.70-75 region and rose above 107.00 level mainly due to the risk-on market sentiment, which undermined the safe-haven Japanese yen and contributed to the currency pair gains. On the flip side, the broad-based US dollar edged lower on the day backed by the lack of safe-haven demand in the market kept a lid on any additional gains in the currency pair.
It is worth recalling that the investors preferred to invest in safe-haven Japanese yen due to the intensified concerns over a surge in new coronavirus infections that triggered the risk-off market sentiment in the early days. In fact, the World Health Organization (WHO) reported a record increase in global coronavirus cases on Sunday.
At the coronavirus front, the latest cases of coronavirus were continuously increasing, while Florida reported an increase of 3.7% in cases against a previous 7-day average of 3.5%. Texas, Oklahoma, and California were also showing a sharp rise in cases that initially exerted some downside pressure on the risk sentiment.
Eventually, the risk-off market sentiment was short-lived due to the fresh hopes that the United States seemed unlikely to impose a total lockdown. The fresh optimism further bolstered the risk-on market sentiment that US President Donald Trump recently showed a willingness to step back from imposing sanctions on Chinese diplomats over the Xinjiang issue to safeguard the trade deal.
Despite the intensified fears of the second wave of coronavirus and fear of restriction measures to curb the number of cases, the broad-based US dollar failed to extend its overnight gains and edged lower on the day possibly due to fresh upticks in the US stocks futures which kept the US dollar prices lower and contributed to the currency pair losses. Whereas, the dollar index, which tracks the greenback against a basket of six other currencies, was down 0.1% at 97.493 at 3 AM ET (0700 GMT).
On the other hand, the Dragon Nation recently canceled American meat imports from Tyson plant after workers tested positive for COVID-19, which kept a lid on fresh optimism surrounding the market.
From the technical perspective, the currency pair remains well within a broader trading range held over the past 3-sessions. It will be reasonable to wait for some strong follow-through buying before traders start positioning for any further near-term appreciating move for the USD/JPY pair.
The market traders will keep their eye on the US economic docket, which will highlight the only release of Existing Home Sales. However, this data will influence the USD price dynamics and provide some short-term trading impetus ahead.
The USD/JPY is trading at 106.914 level as it continues trading sideways in a wide trading range of 107.620 – 106.630. It failed to break above an immediate resistance level of 107.580. This level is working as resistance for USD/JPY, and the 50 periods EMA is also prolonging strong resistance at 107.580 zones while immediate support lingers nearby 106.600. The USDJPY bearish trend can trigger a sell-off unto the next support level of the 106.017 level today.
Entry Price – Buy 106.962
Stop Loss – 106.562
Take Profit – 107.362
Risk to Reward – 1
Profit & Loss Per Standard Lot = -$400 / +$400
Profit & Loss Per Micro Lot = -$400/ +$40