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USDJPY dipped to local lows around 108.75 earlier in the day but regained the upside momentum and trimmed its intraday losses. The greenback is trading in a choppy manner after the preliminary GDP figures showed the US economy expanded at an annualized 2.1% in the fourth quarter, in line with previous estimates. Dollar demand has eased yesterday, after the Federal Reserve reiterated that the current monetary stance remains appropriate for the time being. 

USDJPY has been declining since mid-January, when the pair was rejected from highs around 110.30. Within the retreat, the dollar receives support at the 100-daily moving average around 108.70. As long as this level holds, the downside risks are limited. However, considering the lingering concerns over the spread of a China coronavirus, the pair may yet see another wave of decline these days, as investors will likely remain cautious, assessing the potential economic consequences from the outbreak. 

In the near term, the pair needs to get back above the 109.00 handle in order to get a chance to regain the upside bias. But the technical indicators show that there is a possibility of deeper losses before a reversal takes place. 

Early on Friday, China will reveal its manufacturing and service PMIs for the month of January. Traders will closely watch the numbers, and should the survey disappoint, the intensified risk aversion could send the pair to fresh lows below the 100-daily moving average. Also, US personal consumption expenditures data will be in focus and will set the tone for dollar pairs in general tomorrow. So far, risks are still tilted to the downside, as the coronavirus concerns prevail in the global financial markets. 

In the immediate term, if the World Health Organization labels the virus as a global epidemic during today’s emergency meeting, safe haven demand will accelerate and thus will send USDJPY substantially lower from the current levels. For now, the 109.00 handle serves as the immediate resistance. Once above this level, the greenback will need to overcome the 109.30 region.

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