USD/JPY: Building downward pressure to break out below 106-110 range – MUFG

FXStreet reports that the US dollar has remained at weaker levels overnight with further losses mainly concentrated against the yen. It has resulted in USD/JPY moving closer towards the bottom of its current trading range between 106.00 and 110.00 that has held for the majority of time since last May. The yen stands to benefit if optimism over the global recovery begins to fade after the initial sharp bounce back, per MUFG Bank. 

“The yen has benefitted more broadly overnight by more evidence of rising geopolitical tensions between China and the West. It has been reported that China has ordered the US to close its consulate in the southwestern city of Chengdu in retaliation for the US decision to close the Chinese consulate in Houston. It follows comments overnight as well from US President Trump who stated that the trade accord with China means “much less to me” because of China’s role in the spread of COVID-19.” 

“If the US dollar continues to weaken more broadly, we would expect USD/JPY to start to come under more downward pressure as well going forward.”

“The dollar index broke below the March low yesterday taking it to its lowest level since the autumn of 2018. It increases the risk that USD/JPY could soon break out below the 106.00 to 110.00 range.”