Daily Market Recap - USDJPY

The USDJPY rose sharply on Tuesday and is seeing some follow-through buying today as the global economy continues to recover steadily in the wake of the COVID-19 pandemic.

The pair is up over a percentage point in the past two days after having been confined to a narrow trading range in the past month.

The breakout seen yesterday was fuelled mainly by risk-on trade sentiment, with investors flocking over to riskier assets/ currencies in an aggressive bet over the speed of the economic recovery. The economic data released today supports this conclusion as European, US, and Chinese PMI figures all beat expectations.

Japans services sector remains in contraction in May, extending the contraction to a consecutive fourth month. Though the pace of the decline is stabilizing, analysts point towards the long-lasting effects on tourism as a strong headwind ahead.

The USDJPY is now trading at its highest level since April 9th, effectively breaking out of 108.443 to 105.896 range, suggesting further buying pressure in the short run. The pair has made an attempt to move above the immediate resistance point at the 0.5 Fibonacci retracements of 108.839 but seems to be met with a strong supply.

The threat of a return to sideways trading below the 108.443 mark remains a possibility given the current inconclusive price action though short-term momentum remains bullish on the daily chart. Should the USDJPY manage to firmly close above 108.839, a push towards the April highs of 109.382 may be feasible.

(Chart Source: Tradingview 03.06.2020)

Going forward, the greenback is slowly losing its appeal as a safe haven, while the Japanese Yen is struggling, even more, to find buying demand as the global economy continues to recover. The upcoming second Japanese relief package to be voted next week should provide added volatility to the USDJPY.

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.