USD/JPY is retreating as the bearish commercial implications of the spreading coronavirus and related travel bans during China's New Year travel holiday are lifting the haven yen, dragging 10-year Treasury-JGB yields toward H2 2019 lows, USD/CNY toward 2020 highs and giving priced-to-perfection equity markets something to ponder.
Adding to USD/JPY's slide from January's 110.30 high is likely profit-taking by greatly expanded IMM net spec longs, with risk of stop-loss selling as the 107.65-110.30 rise is retraced.
There's some support in the 109.30s, but the daily kijun and 50% Fibo of January's rise at 108.98 should be in play after today's trading range fell below the tenkan at 109.88 nL1N29S0EH.
Given that it could be weeks before there is a decent understanding of just how widely the new virus has spread and how much it will disrupt the Chinese and global economies, the risk-off drag on USD/JPY is unlikely to abate soon.
There is also the chance that the risk-on response to the U.S.-China phase 1 trade deal peaked after the well-telegraphed signing, as the ability to execute the agreement and possible costs to other countries is gauged, particularly with the U.S. turning it trade policy attentions to the EU nL1N29R0Y1 and UK.