Daily Market Recap - USDJPY

The USDJPY extended its daily gains for a consecutive session on the back of increased risk appetite. At the time of writing, the pair is currently trading in the 109-handle, corresponding to a 0.76 percent appreciation over the previous day.

Fears have slightly subsided over the severity of the coronavirus epidemic, providing a boost to equity markets. Furthermore, US treasury bonds put in a strong performance today with the current yield on the 10-year bills standing at 1.568 percent, an increase of 4 basis points since the previous auction. The yield on US 10-year bills typically exhibits a strong positive correlation with the USDJPY.

Wall streets main indexes climbed higher on Tuesday, with the Nasdaq leading the pack at 2.1 percent. European markets were also up today, with the Stoxx 600 climbing 0.90 percent in early day trading.

The USD has enjoyed a solid increase in demand in recent trading sessions, helping to conserve its strength. The dollar index is close to reaching the 98 marks, after a two-day rally of 0.60 percent. On the economic data front, the US ISM-NY business conditions index in January increased to 45.8 from 39.1. The rise in the greenback played a large role in the appreciation of the USDJPY pair.

(Chart Source: Tradingview 04.02.2020)

From a technical perspective, the pair managed to clear above the 109.307 resistance level, suggesting a push towards the 109.773 marks is well on the table. Buying pressure may continue its trajectory in the coming days, with the RSI remaining in a relatively neutral zone. Looking at the MACD indicator, momentum is slightly tipping in favor of the bulls. However, we can expect to sell pressure to manifest itself after today's strong performance. Traders will be looking at a price reaction at the daily high of 109.545 to determine the short term direction. Should the balance tip in favor of the bears, the immediate support of 109.307 will likely be tested.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.