USD/JPY extends two-day losing streak below 107.00 as US dollar pares gains

• USD/JPY remains pressured amid broad risk-off, benefits from recent USD weakness.
• Doubts over the Fed rate, trade/virus woes keep the pair heavy.
• Japan’s Machine Tool Orders, US Jobless Claims to decorate calendar.
• Qualitative catalysts will be the key for near-term direction.

USD/JPY drops to 106.85, intraday low of 106.82, amid the initial hour of Tokyo open on Thursday. While broad risk aversion wave has been exerting downside pressure on the pair for the last two days, the latest weakness can be traced from the US dollar pullback.

Despite the Fed policymakers’ efforts to rule out negative interest rates, US President Donald Trump said, “I like negative interest rates.” Also adding to the greenback’s declines could be comments from US Treasury Secretary Steve Mnuchin who spread worries for the current quarter while showing readiness to take action.

Concerning the risks, the wave 2.0 of the coronavirus (COVID-19) pushes global diplomats to rethink their plans of reopening the economies.

Additionally, pessimism surrounding the US-China tussle also weigh on the market’s risk-tone. US President Trump recently blocked investments into the Chinese stocks which the dragon nation reacted to harshly. Earlier, the Republican leader has ruled out renegotiation of the Phase 1 deal while alleging China for the virus outbreak.

It should also be noted that US President Trump may levy sanctions on the Asian leader if the US Senate passes a bill that enables the Republican leader to do so if the dragon nation fails to cooperate on virus investigation.

While portraying the risk aversion wave, US 10-year Treasury yields extend their south run to 0.64% whereas Japan’s NIKKEI also drops 0.55% to 20,160 by the press time.

Looking forward, traders will keep eyes on the preliminary reading of Japan’s Machinery Tool Orders for April, prior -40.8%, as well as trad/virus headlines, for the immediate direction. However, US Jobless Claims will be the key during the rest of the day.

Technical analysis

The pair’s break of 10-day EMA level of 107.00 seems to drag it towards the monthly low near 106.00. Though, the buyers remain sceptic, unless breaking a 50-day EMA level of 107.70 on a daily closing basis.