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USD/JPY Recovers Amid Risk-on Market Sentiment – Quick Trade Plan! 

During Monday’s European trading session, the USD/JPY currency pair successfully stopped its early-day losses, taking some modest bids above the 107.00 mark. However, the currency pair is trading with a mild bullish bias, mainly due to the risk-on market sentiment, triggered by incoming positive economic data, and this raised hopes of a swift economic recovery, remaining supportive of the upbeat market mood. However, the risk-on market sentiment undermined the safe-haven Japanese yen and provided a modest lift to the USD/JPY pair. 

On the other hand, the weakness of the broad-based US dollar, in the wake of risk-on market sentiment, has kept a lid on any additional gains in the currency pair, at least for now. At this moment, the USD/JPY currency pair is trading at 107.08 and consolidating in the range between 106.78 and 107.09.

Despite concerns about the ever-increasing number of coronavirus cases across the world, the investors continued to think that the worst of the pandemic was probably over, and they were also encouraged by the positive economic data, which continuously fueled expectations for a V-shaped global economic recovery and continuously provided support to the upbeat global risk sentiment.

As per the latest report, the US has recorded 59,747 new infections in the last 24 hours, as per the Johns Hopkins University. At the same time, the total number of cases in the US have crossed the 3.3 million mark. It should be noted that Global figures now exceed 13 million, and global institutes report more than 565,000 deaths in the last 7 months, due to the virus. As we know, the US is leading the race. Unfortunately, Brazil and India are also following in the footsteps of the US. The latest figures from Florida reported over 15,000 new cases on Sunday, after further pressure to reopen schools and anti-mask protests.

However, the upbeat sentiment was supported by the hopes of a coronavirus vaccine, which overshadowed the fears of the resurgence of the virus late last week. The studies carried out with Remdesivir showed that the drug reduced coronavirus deaths by 62%. Furthermore, the reason for the boosting sentiment could also be associated with reports that Pfizer and BioNTech had announced that their vaccine could be approved by the FDA as soon as December. 

Moreover, the risk-on market sentiment was further bolstered by the hopes of further stimulus from the US, due to the downbeat Producer Price Index (PPI). It was also backed by the comments from the President and CEO of the Federal Reserve Bank of Dallas, Robert Kaplan. 

As a result, the broad-based US dollar reported losses on the day, possibly due to the upbeat trading sentiment, backed by multiple factors. However, the losses in the greenback could be short-lived or temporary, as the second wave of coronavirus is continuously picking up pace in the US, although the losses in the US dollar kept a check on the currency pair’s gains. Meanwhile, the US Dollar Index, which tracks the greenback against a basket of other currencies, slipped by 0.17%, to 96.448, by 10:03 AM ET (3:03 AM GMT).5 GMT). 

On the US-China front, the full-fledged war between the world’s top two economies remained on the cards. The US government is also expected to announce additional punitive measures on China due to the Hong Kong security laws. To add insult to injury, US President Donald Trump also announced on Friday that there would be no Phase 2 Trade Deal with Beijing any time soon, which initially weighed on the risk sentiment. In return, China’s Foreign Minister retaliated with the announcement that the country would impose sanctions on US lawmakers.

In the absence of the major data/events on the day, the market traders will keep their eyes on the USD price dynamics and the coronavirus headlines, which could play a key role in influencing the intraday momentum. The traders will keep their eyes on the news concerning the US-China debacle. 

Daily Support and Resistance

S1 106.06

S2 106.47

S3 106.69

Pivot Point 106.87

R1 107.1

R2 107.27

R3 107.68

The USD/JPY pair is testing the downward channel resistance level of 107.028, while the support level holds at 106.963. A bullish breakout of 107.028 could lead the USD/JPY pair towards the next resistance area of 107.828. The 50 EMA suggests a bullish bias, along with MACD and RSI. Let’s look at buying trades over 106.87 and selling below the same today. Good luck! 

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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