USD/JPY battles 108.00 to refresh three-week high amid mixed catalysts

• USD/JPY gradually extends five-day winning streak, seesaws near the highest levels since June 09.
• Japan’s quarterly Tankan report portrays the virus woes amid upbeat Capex data.
• The rise in the US coronavirus cases, Sino-American tussle probe the previous risk-on mood.
• Japan’s Jibun Bank Manufacturing PMI and Consumer Confidence could entertain traders ahead of the busy US session.

USD/JPY takes the bids near 108.00 at the start of Wednesday’s trading session in Tokyo. The yen pair carries the upside momentum after quarterly Tankan Manufacturing and Non-Manufacturing data from Japan print downbeat outcomes. That said, the pair’s earlier losses could be traced to the market’s broad optimism with quarter-end rebalancing moves, US data and hints of further stimulus offering background music.

Japan’s second-quarter Tankan Large Manufacturing Outlook slipped below -24 forecast to -27 whereas the Non-Manufacturing Outlook softened from -15 expected to -14. Further details suggest that the Tankan Large Manufacturing Index slumped to -34 in Q2 versus -31 market consensus.

While downbeat data from Japan underpinned the quote’s latest rise, challenges to the risk guard the immediate upside. Among them, the fears of the coronavirus (COVID-19) wave 2.0 gains immediate attention. The reason could be traced from Reuters’ headline suggesting that the US cases rise by more than 40,000 on Tuesday, the fifth time in the past six days.

Other than the virus woes, the US-China tussle also intensifies and probes the previous risk-on sentiment. Following Beijing’s passage of the Hong Kong security law, the US suspended the special treatment for Hong Kong. In a reaction, the dragon nation threatened to retaliate and blocked the Trump administration’s efforts to keep the unilateral sanctions on Iran. It should also be noted that US President Donald Trump recently tweeted his “angst” on China and offered additional burden on the risks.

As a result, the S&P 500 Futures part ways from Wall Street’s upbeat performance while printing 0.30% losses to 3,081. Further, Japan’s Nikkei prints 0.20% gains whereas the US 10-year Treasury yields stay modestly changed near 0.66% as we write.

Considering the presence of second-tier Japan data, coupled with the recently active performance of the qualitative catalysts, the USD/JPY prices can offer active session ahead. However, a major move is likely to take place during the US session when the FOMC Minutes, ADP Employment Change and ISM Non-Manufacturing PMI stand tall to direct the traders.

Technical analysis

The pair’s ability to cross 100-day SMA, currently around 107.92, favors the buyers to aim for 108.40 resistance comprising 200-day SMA. On the flip side, June 16 low near 107.60 might offer additional support below 107.92 during the quote’s pullback.