USD/JPY: Depressed around 106.00 as risk dwindles

• USD/JPY struggles for clear direction after declining the previous day amid risk-off mood.
• Japan’s PPI marched -0.5% YoY forecast in August, BSI Large Manufacturing Conditions Index for Q3 surges to 0.1 from -44.2 forecast.
• Chatters over US-China tussle fails to get major attention, US dollar consolidates after Thursday’s rebound.
• Brexit, delay in the US stimulus and virus woes favor the pair sellers.

USD/JPY remains mildly offered around 106.10 as markets in Tokyo open for trading. In doing so, the quote respects the latest recovery in Japanese data amid risk-off sentiment. The declines also take clues from the US dollar’s consolidation and recovery of the coronavirus (COVID-19) numbers from Tokyo.

Record bounce in BSI numbers keeps JPY buyers hopeful…

Other than the recent risk-off mood, the record recovery in the BSI Large Manufacturing Conditions Index for the third quarter (Q3), from -44.2 expected and -52.3 prior to +0.1, suggests that the Japanese economy is up for a strong recovery. Also pleasing the JPY traders could be the Producer Price Index (PPI) data for August that recovered to -0.5% from -0.9% YoY.

Furthermore, news that Tokyo eases the virus-led restrictions, backed by gradual declines in cases off-late, also adds strength to the Japanese currency.

Additionally, the risk of no-deal Brexit, delay in the US stimulus and the Trump administration’s harsh stand against China, also offer extra burden onto the pair. It should be noted that the European Central Bank’s (ECB) effort to placate bears with an upward revision to near-term economic forecast gained a little success despite initial positive reaction.

As a result, the JPY became the only G10 currency to confront the US dollar and marks gains on Thursday.

Even so, the market sentiment barometers retrace off-late, with S&P 500 Futures up 0.50%, as a lack of major catalysts pushes the traders toward cashing the gains amid a quiet session. Also likely to push the traders is the cautious mood ahead of the US Consumer Price Index (CPI) for August. The headline inflation number is expected to rise from 1.0% previous readouts to 1.2% in the stated month and may challenge the USD/JPY sellers.

Technical analysis

Unless providing a daily close beyond the 50-day SMA, at 106.30 now, traders are less likely to turn bullish, not even for the short-term.