- A combination of factors helped the USD / JPY gain positive traction on Monday.
- The risk climate prevails, the Japanese GDP report has undermined the JPY refuge.
- Worsening US-China relations and weak demand for USD prevented any further gain.
The USD / JPY pair rose slightly during Monday’s Asian session, although it did not have a solid follow-up and remained well confined to a four-day trading range.
A combination of support factors helped the pair gain positive traction on the first day of a new trading week. Global sentiment has risen sharply in response to optimistic comments by Fed Chairman Jerome Powell on the US economy this weekend.
The mood for risk weighed on the safe haven Japanese yen, which was further pushed by data showing that the domestic economy went into recession in the first quarter of 2020. In fact, Japanese economic activity declined by 0 , 9% QoQ and 3.4% YoY in the quarter from January to March.
However, the worsening of US-Chinese relations has prevented any galloping rally for the USD / JPY pair. It should be recalled that the United States Department of Commerce decided on Friday to block the supply of chips to Huawei Technologies and subsequent reports have signaled a possible reprisal from China.
This is due to growing fears about the second wave of coronavirus infections, which should continue to prevent investors from placing aggressive bull bets. It is therefore prudent to wait for solid follow-up purchases before positioning yourself for a new appreciation.
In the absence of a major economic publication in the market from the United States, trade-related headlines could influence the general feeling of market risk and play a key role in producing significant business opportunities around the main one.