- The USD / JPY remains firmer after Japan’s GDP in Q1 2020.
- Powell of the Fed defines the use of negative rates despite the display of ammunition from the central bank.
- American-Chinese confrontation, the update of the virus weighs on the tone of the market risk, Powell’s cautious optimism belatedly risks.
- Virus / trade updates will keep the markets entertained on a light calendar day.
The USD / JPY is bidding near 107.25 as the Tokyo market opens after the release of Japan’s Q1 GDP on Monday. The yen pair appears to have ignored optimistic Japanese statements amid a slightly better sense of risk. The reason could be traced from comments by Fed President Jerome Powell in the American television interview titled “60 minutes”.
Preliminary readings of Japan’s GDP in the first quarter of 2020 fell 0.9% from the median forecast of a 1.2% drop in QoQ.
Read: Japan’s first quarter GDP marks second consecutive quarter of contraction
Fed President Powell has ruled out the risks that the United States will enter a second Great Depression while being ready to act. The Fed decision maker also cited the risks that the unemployment rate could reach 20-25%. The central banker also said that the economy could start to improve fairly quickly, but that resumption of growth will require restoring confidence.
Read: Fed Powell: Fed Is Not Running Out Of Ammo, Can Do More If Needed – 60 Minute Interview
In addition to the cautiously optimistic words of the Fed chairman, the praise of U.S. President Donald Trump for resuming the spread of the virus also seems to contribute to the feeling of risk.
That said, the S&P 500 Futures posted gains of 0.7% to 2,865 while the Japanese NIKKEI made gains of 0.20% to 20,070 in the first minutes of the day’s trading open.
Earlier in Asia, the market risk sentiment remained subdued as the United States and China embarked on a war of words. While US President Donald Trump has said that China could have stopped the virus epidemic, the editor of the Global Times, Hu Xijin, called on the dragon nation to develop its nuclear arsenal. The Chinese media appears to have observed President Trump’s remarks last week on preparations for the “super-duper” missile.
In the future, a light economic calendar may keep US-Chinese headlines, as well as viral updates, as the key to short-term direction.
Buyers will be hesitant to enter unless they break the 50-day EMA, currently close to 107.65, which in turn highlights the risks of seeing a monthly low close to 105.99 return to the chart.