On the last working day of the week, USDJPY showed a two-way action, initially rising to 108.96, then moving to lows in the 108.80 region, recovering back above 109.00 and finally dropping below this level.
On Thursday evening, during an extraordinary meeting the World Health Organization (WHO) declared a global health emergency due to Chinese coronavirus outbreak. However, in its comments the UN, the institution stressed that it was not recommended to put a ban on the international trade and travel. Moreover, they approved Chinese efforts aimed at curbing the disease and believed that China would be able to confront it. Such conciliatory tone soothed markets and revived the risk-on sentiment that undermined the Japanese yen.
Further, the USD benefitted from a strong rebound in the US Treasury bond yields that helped the major to extend its recovery. But shortly after, USDJPY trimmed some gains and pulled back to the 108.80 region.
Later on, Japan published a bunch of data including Tokyo CPI, Retail Sales, Industrial Production and the Unemployment Rate. While the readings in inflation, industrial sector and labor market were decent, the retail trade figures missed expectations badly and were much lower than previous results. In response to the disappointing release, JPY weakened, fueling the USDJPY rise.
And when the bears seemed to have already lost control and given ground to the bullish traders, Thailand and the UK reported first cases of local person-to-person spread of coronavirus. The news weighted heavily on positive market sentiment bringing back heightened concerns over the new disease. The safe-haven yen took advantage of the situation and the major pierced the 109.00 mark once again.
From the technical point of view, the USDJPY remains within reach of 109.00 above its SMA100 and 200 but below its SMA20 and 50. The resistance lies at 109.25, 109.65 and 109.85 while the support awaits at 108.75, 108.00 and 107.00. Now, it will be interesting if coronavirus will continue to hurt market sentiment and keep a lid on the major’s recovery, or China will manage to fight the disease and calm markets down.