USD/JPY awaits clear direction above 103.00, US stimulus, virus in focus
- USD/JPY wavers in an eight-pip range while fading corrective recovery since last Thursday.
- US policymakers vote on the much-awaited stimulus, new strain of covid cane be cured.
- Sino-American tussle, Russian hack and mixed Brexit signals offer additional burden on the risks.
- No major data/events keep risk catalysts on the driver’s seat.
USD/JPY treads water around 103.30 amid the initial hour of Tuesday’s Tokyo open. While recently challenges to the risks, mainly emanating from China and Russia, seem to probe the buyers, hopes backed by the US coronavirus (COVID-19) stimulus and expectations to tame the covid variant keep sellers at bay. Above all, a light calendar and the wait for the year-end holiday season are likely catalysts that result in an inactive session so far in Asia.
The US announced further visa restrictions on Chinese officials with Department of Homeland Security chief Chad Wolf suggesting further restrictions on China, including tighter visa curbs on Chinese Communist Party members as well as a broader ban on goods made with forced labor. Additionally, US Senator Ron Wyden said, Treasury staff tells senate finance committee that treasury suffered a serious breach, beginning in July, the full depth of which isn’t known.”
On a different page, US Congress members are voting on the $900 billion aid package and $1.4 trillion omnibus spending bill with most policymakers up for a grant to end the downbeat year on a positive note. Elsewhere, vaccine companies like BioNTech and Moderna join the European Medicines Agency to tame the pessimism concerning the latest variant of the COVID-19.
It should be noted that the EU-UK talks are progressing towards the fisheries’ solution, which in turn offers additional support to the market optimism.
Even so, S&P 500 Futures drop 0.10% while Japan’s Nikkei 225 also mark 0.70% intraday losses by press time.
Looking forward, the passage of the US aid package can renew corrective recovery of the US dollar while also favoring the risks.
Against this backdrop, JP Morgan pushes for the USD/JPY and EUR/JPY short calls for one to the six-month horizon while citing ‘tactical’ trade.
Technical analysis
Not only failures to cross 21-day EMA level of 103.86, needless to mention the six-week-old falling trend line near 104.15, but bearish MACD also favor USD/JPY sellers to target the sub-103.00 area.