- The rise in the USD / JPY as US stocks continue to fight while the short-term outlook remains positive.
- The USD hit the three-month low against the G10, but the yen canceled the safe haven offer.
The USD / JPY has recovered from a Fibonacci retracement at 78.6% of the March 16 pulse, as global markets extend their returns from massive virus sales.
As of this writing, the pair is up 0.26% on the session, with some moderation in the US data and a reduction in the general risks weighing on what can be perceived as an overvalued yen.
Despite a new three-month low in the defensive USD that continues to slide as the sense of global risk improves, the USD / JPY managed an offer as US stocks climb higher. The DXY fell to a low of 97.19 from the day’s highs of 97.63 while the G10-FX continues to recover.
One of the positive factors, in addition to the economies that are going back to work, easing social distancing measures and seeking to open their borders (as in the EU), the risks of trade war have lost their impact.
This week’s report that Chinese state-owned enterprises bought American soybean shipments on Monday despite previous headlines of the stoppage has raised bullish spirits. US Senator Grassley also stressed that the US-China trade deal is on the right track.
G10 overbought coins?
“We are also watching JPY closely, where long constructs are likely to unwind following a sudden push above 108.10 / 30 against the USD. Most G10 currencies are now” overbought “on the daily RSI, “analysts at TD Securities noted.
Meanwhile, all eyes are on global economic data as well as on central bankers. Today, we are hearing positive rhetoric from the governors of the bank and Stephen S. Poloz, the last to date, to give an optimistic tone as the blockages of the coronavirus come out. Regarding the data, we had some clear positive surprises, in particular from China and the United States, the two most powerful economies in the world and the countries hardest hit by the virus.
V-shaped recovery of data on which Wall Street relies, weighing on the yen
First, the series of private ADP payslips showed far fewer net job losses than expected. The markets were looking for a monthly drop of 9 million jobs, but we only got 2.76 million in May, suggesting that hiring was more aggressive during the reopening phase. Another surprising finding was the housing data. This morning’s mortgage approval data showed the seventh consecutive increase in home purchase requests. We are seeing V-shaped recoveries in the US and China data, which helps support the bullish sentiment in stocks and should therefore weigh most heavily on the yen at this point.