USD/JPY nears three-week low around 109.50 amid mixed Japan data, risk-off

• USD/JPY remains on the back foot.
• Japan data suggest inflation continues to linger while the Unemployment Rate shot up recently, Retail Sales and Industrial Production mark improvements.
• Geopolitical tension between Syria and Turkey joins coronavirus-led risk-off.

USD/JPY declines to 109.60, down 0.22%, following the release of Japan’s data-dump during the Asian session on Friday. While downbeat economics keep highlighting the recessionary fears for Japan, risk aversion is likely helping the Japanese yen at the moment. Among the risk catalysts coronavirus (COVID-19) and geopolitical tensions between Turkey and Syria are likely in the focus. On the contrary, January month Retail Sales and the preliminary reading of Industrial Production flashed upbeat readings.

Japanese data continues to portray recession risk…

Tokyo Consumer Price Index (YoY) slipped below 0.8% forecast to 0.4% whereas the core reading excluding Fresh Food fell past-0.6% expectations to 0.5%. Further, January month Unemployment Rate grew beyond 2.2% prior and forecast to a three-month high of 2.4%.

Read: Tokyo area Feb core CPI+0.5% year/year - govt (Reuters poll: +0.6%)

Following the disappointing -6.3% release of Q4 GDP from Japan, fears of the Asian economy shrinking back regained the traction. The moves got additional support from the governments’ push for the 10 trillion yen ($92.20 billion) stimulus to pay for costs for disaster relief from a string of typhoons that struck Japan in 2019.

Risk tone remains heavy as Turkey-Syria fight joins coronavirus fears…

The killing of 29 Turkish troops by Syria adds fuels to the geopolitical risks emanating from the standoff in Idlib. The Turkish forces are ready to retaliate and are also pointing at Russia to have a hand. This could weigh on the risk sentiment that is already bearing the burden of the coronavirus outbreak.

The Moody’s recently came out with the note that COVID-19 poses a downside risk to the US economy and though there are limits to monetary policy, the Federal Reserve may need to step in. Elsewhere, Bank of America/Merrill Lynch revised down its global growth forecast to the weakest since 2009 to 2.8%.

Even so, the US President Donald Trump recently tried to placate traders but couldn’t get any positive response from the markets.

While portraying the risk-off, the US 10-year treasury yields slipped two basis points to 1.28% whereas S&P 500 Futures is marking a pullback of 0.64% to 2,968 by the press time. It should be noted that the US bond yields for 10-year note dropped to the record low of 1.244% the previous day.

Given the most data from Japan out and ignore due to the present risk aversion, investors will now concentrate on the coronavirus headlines for fresh impulse.

Technical Analysis

A sustained break of 21-day SMA level of 110 gradually drags the quote to an ascending trend line since January 08, around 109.00.