USD/JPY remains at risk as markets try to judge whether recent, sizeable risk-off flows have already captured the crux of the likely economic damage from the coronavirus.
Beyond that, investors have to decide whether optimism about expected improvement in growth and risk-taking tied to the U.S.-China trade deal and tonight's Brexit got ahead of itself before the virus hit.
USD/JPY is trending lower due to falling Treasury-JGB yield spreads and this week's pricing in of a second Fed rate cut by next year.
Treasury yields are falling on expanding virus-related travel bans and work stoppages, mediocre U.S. data nL1N2A00JC and weak euro zone nL8N2A0355 and Japanese data nL4N29Z6VY.
USD/JPY bounced to 109.14 overnight on hopes the WHO's praise for Chinese efforts to contain the outbreak meant the damage would be relatively short-lived.
But the rebound was rejected by the key 55-DMA and daily cloud top at 109.17/22.
Though there's some scope for virus overreactions to mean revert, USD/JPY's weighed down by 10-year Treasury-JGB spreads at their lowest since 2016 and the increased expectations of more Fed easing -- reflected in rate futures -- over the next year.
A USD/JPY close below the 55-DMA and 61.8% of the 107.65-110.30 rebound at 108.76/65, would target 38.2% of the August-January rally at 108.07 next.