USD/JPY: A touch lower than 110.00 amid broad US dollar strength, risk-off

• USD/JPY recovers following the upbeat US data, a trade-positive announcement from China.
• The coronavirus-led risk-off couldn’t choose clearly between the greenback and the Japanese yen.
• The second-tier data from Japan awaited with eyes on any developments from Beijing.

USD/JPY trades mildly positive to 109.90 during the early Asian session, ahead of the Tokyo open, on Wednesday. The risk barometer recently failed to portray the market’s fears from China’s coronavirus amid broad US dollar strength, also backed by the upbeat US data. Traders will now keep eyes on Japan’s December month Machinery Orders and trade numbers for January for immediate direction. Though, it doesn’t dim the importance of any headlines from China.

The struggle amid the risk-off…

Despite being the only major currency to not lose against the greenback, the Japanese yen failed to properly portray the market’s risk aversion based on China’s coronavirus related headlines.

While the coronavirus numbers from China and the epicenter Hubei are receding off-late, there is a doubt concerning unreported cases as well as the time period over which the epidemic will last.

Also, Moody’s cut to China’s growth forecast, from 5.8% to 5.2%, added strength to the investors’ fears that the world’s second-largest economy will be hit hard due to the contagion. The same pessimism was earlier spread through Apple that signaled to miss the forecasts amid depleting demand from China.

Portraying this, the US 10-year treasury yield and Wall Street took a back foot following the previous day’s rise.

Even so, the US dollar continued to benefit as upbeat data and broad support to the current monetary policy favored the US currency.

Another USD-positive could be traced from China’s readiness to cut tariffs on 696 US goods to facilitate mode imports and near the phase-one deal promises. Furthermore, China’s Commerce Ministry spokesperson recently showed readiness to take measures to boost foreign investment and the same could offer a pullback amid the broad risk-off.

Trades will now concentrate on Japan’s Machinery Orders, expected -9.0% versus +18% prior, as well as Merchandise Trade Balance, forecast ¥-1694.9 B versus ¥-154.6 B. Following that, the US housing market data and Producer Price Index (PPI) could decorate the economic calendar. However, nothing will dim the impact of Chinese headlines.

Technical Analysis

Tuesday’s “hanging man” bearish candlestick formation suggests the pair’s another failure to stay strong beyond 110.00, which if failed could challenge the yearly top surrounding 110.30 and aim for May 2019 high close to 110.70.