USD/JPY: Sluggish below 106.00 amid quiet markets

• USD/JPY teases the bears while refreshing the intraday low.
• Risk-tone remains firm with S&P 500 Futures flashing record high.
• Concerns surrounding Japanese PM Abe’s health, virus woes in Tokyo fail to heavy Japanese yen.
• US election news, Sino-American tension could be spotted as the latest catalysts even as global markets remain mostly inactive.

USD/JPY declines to 105.75 during the initial hour of Monday’s Tokyo open. The pair joins the previous two-day downside while taking a U-turn from the intraday high of 105.94 after Japanese traders kick-start the week. Although risk-on sentiment should have helped the quote by now, US election headlines and fears of worsening Beijing-Washington tussle weigh on the pair off-late.

Traders seem skeptical of the stock market rally…

While the global market cap hit all-time high and the S&P 500 Futures also refreshes the record top with 3,399.62, Japan’s Nikkei 225 fails to cheer the run-up while taking rounds to 22,930 by the press time. The reason could be traced from the market fears concerning Japanese PM Shinzo Abe’s health. During the weekend, the Asian news Yomiuri said that the national leader will visit a Tokyo hospital on Monday morning. The update also mentioned PM Abe’s more than seven-hour long medical examination conducted last week.

Elsewhere, the US-China tension gets heated as the dragon nation dislikes American planes flying off the South China Sea. Also highlighting the risk is the news suggesting Huawei’s cancellation of orders from suppliers. Though, the policymakers from both nations are still not defying the hopes of the phase one trade deal.

Furthermore, news concerning the Democratic Presidential candidate Joe Biden’s offer of no new taxes for people earning below $400,000 and US President Donald Trump’s vaccine hopes to gain a little attention.

It should also be noted that the coronavirus (COVID-19) cases in Tokyo stayed beyond 200 for the fourth consecutive day on Sunday as per the Kyodo news.

Amid all these catalysts, JP Morgan anticipate USD/JPY to grind lower with the stop loss of 107.69. The bank said, “Japanese outbound flows have subdued over the last couple of weeks which lessens what has been a material impediment to JPY strength. USD negative political drags stemming from the ongoing stalemate in fiscal talks.”

Looking forward, a lack of major data/events will keep the pair of traders stuck around the risk headlines for fresh impetus.

Technical analysis

Unless defying Friday’s Doji formation, by a downside break below 105.40, USD/JPY becomes capable of challenging Thursday’s high of 106.21.