USD/JPY is feeling the pull of gravity alongside corona virus-led ron in the equity and bond markets. The risk appetite has weakened as the second wave of the corona virus is accelerating in the US. Investors fear the authorities may respond by imposing the economically-painful lockdown restrictions.

However investors could be pricing out the optimism factored in following the US drugmaker Pfizer’s announcement of the corona virus vaccine’s positive results. On Thursday, the US Federal Reserve Chair Jerome Powell said that while the progress on the vaccine front is welcome news, it does not nullify near-term economic risks from rising virus cases.

Mr. Powell’s comments also showed the need for additional US fiscal stimulus. With the split Congress, a massive spending program looks unlikely. That does not imply dollar strength as the Federal Reserve has the ability and is willing to do the heavy lifting. 

Former Chinese Finance Minister Lou Jiwei expressed his view on the likely US-China trade relationship on Biden’s presidency. The key notes of his views are “Even if Biden is president, US-China trade frictions won’t necessarily be eased. ““Financial institutions should be determined to deleverage debt levels in an orderly manner, prevent debt-fuelled recovery.”

On the other hand, by Thursday, Japan confirmed over 1,600 new covid cases, a record daily high since the outbreak of the virus early this year, as per Kyodo news. Even so, Prime Minister (PM) Yoshihide Suga rejects the chatters suggesting a state of emergency while keeping local restrictions on the gatherings and activities.

USD/JPY 4 Hour Chart:

Support: 104.97 (S1), 104.81 (S2), 104.56 (S3).

Resistance: 105.38 (R1), 105.63 (R2), 105.79 (R3).

Amidst all the catalysts creating pressure on the greenback, we expect a bearish trend for USD/JPY.