USD/JPY: Risk reset jostles with US dollar strength around 106.00
- USD/JPY remains depressed for the second-day despite keeping bounce off one-week low.
- AstraZeneca clarifies on the halt in COVID-19 vaccine trials, Japanese Money Supply increased in August.
- Sino-American tension, Brexit woes join increasing odds of further delay in the US stimulus.
USD/JPY picks up the bids near 105.95 amid the initial hour of Wednesday’s Tokyo open. The pair refreshed one-week low with 105.83 level during early Asia before taking clues from a pause in the risk-off mood. Even so, the US dollar remains strong near the monthly high and challenges to the market sentiment remain on the card, which in turn keeps the bears hopeful.
Bulls shouldn’t cheer the pullback…
The fears of no more developments on the coronavirus (COVID-19) vaccine, triggered during the early day, recede off-late after AstraZeneca termed the latest halt in final trials as “routine and voluntary”. Even so, there are nearly nine other drugmakers that recently chose to not progress on vaccine trials unless finding safe research results.
Further, US President’s promise to “stand tough on China”, if he is re-elected, keeps the Sino-American tussle on the risk watchers radars while Beijing stands ready to fight. Also adding to the risk-off mood could be the US Republicans’ bid of $300 billion for the COVID-19 aid package that was termed “an insult to American people” by House Speaker Nancy Pelosi. The talks over the American aid package have been stuck for a long time and witnessed additional worries off-late.
Additionally, Brexit woes and the fears of receding inflation expectations from the US also weigh on the risk-tone.
The increase in Japan’s August month Money Supply M2+CD from 8.4% forecast to 8.6% as well as increasing optimism surrounding the easy money policy, due to the lead of the Chief Cabinet Secretary Suga’s anticipated lead in the PM’s election, also weighs on the Japanese yen (JPY).
Against this backdrop, S&P 500 Futures trim the early-day losses while regaining 3,330 while Japan’s Nikkei 225 drops 1.37% by the press time.
Looking forward, a light calendar in Asia, expected for China’s August month inflation data, may highlight Japan’s August month Machine Tool Orders, prior -31.1%, for fresh direction. Though, major attention will be given to the risk catalysts discussed above.
Technical analysis
The repeated failures to cross 50-day SMA, at 106.34 now, drag the quote towards an ascending trend line from July 31, currently around 105.60.