Daily Market Recap - USDJPY

Risk aversion continues to be felt in the market at the start of the week as new warnings from the WHO over the coronavirus epidemic shook investor's risk appetite. The USDJPY posted strong weekly gains in the previous seven days only to witness a significant correction today, bringing the daily drop to 0.68 percent at the time of writing.

On the back of the renewed warnings from the WHO based mainly on the increase in infection cases outside of China, traders flocked to safe havens such as US treasuries or gold. Wall Street, on the other hand, suffered big losses, the DJIA trading around 1,000 points lower over the previous day. US treasuries have seen its yields tighten significantly, the yield on the benchmark 10-year note falling to 1.35 percent.

With Japan celebrating a holiday on Monday and not posting any economic figures, traders reacted mainly to the slight drop in the US dollar and the speculation over the impact of the virus on the global economy. The upcoming Japanese economic data releases, albeit not quite the type to shake markets, will be the December coincident index, predicted to hold steady, and the leading economic index, also steady. Given the lack of activity on the Japanese markets on Monday, there will likely be a strong pickup in volumes as further follow-through buying of safe-haven assets will surely occur.

(Chart Source: Tradingview 24.02.2020)

From a technical perspective, the USDJPY managed to bounce back above the 61.8 percent Fibonacci retracement level, showing some resilience in buying pressure. Overall momentum remains biased to the upside albeit slightly decreasing in intensity, as seen in the MACD chart. The RSI is hovering below overbought levels, suggesting there may still be room to push upwards, though a downward correction is more likely in the short run. Current support should be felt at the 61.8 Fibonacci level, with stronger support at the 110.184 marks. On the upside, the 110.954 resistance level can be expected to keep any strong gains in check.

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.