Lingering expectations of Fed and RBA rate cuts by September suggest USD/JPY gains based on confidence the coronavirus and other issues will pass benignly nL1N2AA1KL may run into trouble.
USD/JPY's 76.4% Fibo of 2019's slide at 110.53 and nearby Bolli and channel resistance appear to be a tall order.
Even before the coronavirus slammed USD/JPY in late January, USD/JPY had trouble sustaining gains much above 110.
Thus even if the impact of the virus on the Chinese and global economies isn't catastrophic, it might be enough to weaken already slowing global growth.
The mere mention of potential coronavirus risks in Fed Chair Powell's pre-released speech today nW1N29L00C drove USD/JPY to the bottom of today's 109.74-95 range.
Beijing is trying to balance the need to restart businesses nB9N29D01W against the need to contain the virus nL4N2AB02I. An apparent slowing rate of contagion has lifted risk acceptance and weakened the haven yen over the past few sessions because it's seen as the beginning of the end of the epidemic.
USD/JPY's rebound is bolstered by solid U.S. data and 10-year Treasury yields rebounding from crucial 1.5% support.
But 25bp of Fed and RBA rate cuts priced in by September suggest the market sees global and U.S. growth at risk again by then, despite the supposed big rebound in growth in Q2 after virus-driven weakening in Q1.