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USD/JPY jumps more than 100 pips as S&P 500 futures rise nearly 4%

  • USD/JPY jumps from 105.85 to 107.00 in Asia as markets offer yen amid an uptick in the US stock futures. 
  • BOJ offered to buy JPY 100 billion worth of Japanese government bonds.
  • Sustained risk-on cannot be ruled out courtesy of recent easing by the US Federal Reserve. 
  • Monday's inside bar candle has made today's close pivotal.

The anti-risk Japanese yen (JPY) is drawing bids in Asia and pushing USD/JPY higher, possibly tracking the uptick in the US stock futures.

Tests 107.00

The spot is currently trading near 106.80, representing a 0.90% gain on the day, having found buyers near 105.85 in early Asia and challenged resistance of 107.00 a few minutes before press time.

The futures on the S&P 500, Wall Street's equity index and the benchmark for global equities, are currently up 3.87%, having dropped by 12% on Monday.

Apart from the signs of risk reset in the US stock futures, the Yen could be possibly drawing sellers on the Bank of Japan's (BOJ) liquidity injection. The central bank has offered to buy Japanese government bonds worth JPY 100 billion expiring in three to five years and five to 10 years.

The spot could continue to gain altitude during the day ahead if the global equities begin cheering the recent coordinated easing by the major central banks across the globe. Notably, the Federal Reserve cut rates to zero on Monday and announced a $700 per month quantitative easing program.

Inside day pattern

The pair fell by 1.95% on Monday but traded well within Friday's high and low. Essentially, the spot created an inside day candle on Monday, a sign of consolidation or indecision in the market place.

So, a close above Monday's high of 107.57 would imply a bullish breakout from consolidation and signal a continuation of the rally from the March 9 low of 101.18.

Alternatively, a close under 105.15 (Monday's low) would confirm an end of the bounce from 101.18 and shift risk in favor of a re-test of that level.

Technical levels

 

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