USD/JPY fades recovery moves to revisit sub-106.00 region

• USD/JPY fails to keep the previous day’s run-up to 106.15.
• US dollar bears ignore Tuesday’s bounce off 28-month low.
• Global equities remain positive, Treasury yields also recover despite mixed sentiment.
• Updates over PM Abe’s replacement, speech from BOJ’s Wakatabe may entertain traders ahead of US ADP.

USD/JPY stays on the back foot around 105.90, down 0.06% on a day, as traders in Tokyo brace for Wednesday’s move. The pair refrains from respecting the US dollar’s latest pullback as risk-tone amid mixed sentiment.

US dollar stays depressed…

Even if upbeat the record surge in the US ISM Manufacturing PMI triggered the US dollar’s pullback from May 2018 lows, the greenback fails to keep the recoveries afterward as the risk-tone remains firm and weighs on the currency’s safe-haven demand. The US dollar index (DXY) currently takes rounds to 92.27 after bouncing off 91.76 on Tuesday.

While portraying the risk-on mood, the US 10-year Treasury yields ignore the previous day’s declines whereas S&P 500 Futures and Japan’s Nikkei 225 print mild gains by the press time.

Given the mostly silent news feed, traders might have cheered hopes of the coronavirus (COVID-19) vaccine as front-runner pharmaceutical companies, like AstraZeneca, start their final trials. Even so, fears of the escalation in the Sino-American tussle, as portrayed by US Secretary of State Mike Pompeo’s latest comments, probes the bulls. Furthermore, uncertainty concerning the Japanese leadership and the US aid package also challenges the market’s risk-on mood.

With the lack of news updates and a light calendar, market players may keep eyes on the speculations concerning who will lead the Asian major after Shinzo Abe ahead of the US ADP Employment Change for August, expected 950K versus 167K prior. Even so, any extreme comments from BoJ’s Wakatabe can be important to watch. Additionally, developments surrounding the US-China trade tussle and American relief package may offer extra clues to entertain the intraday traders.

Technical analysis

Repeated failures to cross the 21-day SMA level of 106.05 suggest the pair’s revisit to the August month’s low near 105.10. It should also be noted that the bulls are less likely to be convinced unless witnessing a clear break above 100-day SMA, currently around 107.00.