For five trading sessions in a row, the USD/JPY pair is in an upward correction range that moved towards the 104.40 resistance level before settling around 104.10. The correction to the upside came after strong losses for the pair in the first week of 2021 trading, as it retreated to the support level of 102.60. Despite vaccinations, increased fears of a rapid spread of coronavirus shattered optimism that 2021 would be the year for global economic recovery.
Lockdowns have continued, and a major political conference has been announced in a province bordering Beijing that has been the scene of the most serious COVID-19 outbreak in China. As of Tuesday, residents of Gu’an city, south of Beijing, have been ordered to stay home for seven days. Similar measures were taken across the country, especially in the central city of Wuhan, where 11 million people were placed under lockdown for 76 days last winter, at the beginning of the announcement of the discovery of the disease.
Hebei has also postponed meetings of the district's House of Representatives and its advisory board, which usually take place in February. It was not clear when the meetings would take place. Last year, China postponed the meeting of the National People's Congress and its advisory body in Beijing from March to May, which shortened the sessions and limited access to the media.
On Tuesday, the Hebei Provincial Health Commission reported 40 new confirmed cases, all except for one in the provincial capital Shijiazhuang, just south of Beijing, where transmission lines were cut off and residents were told to stay home. Local authorities say that dozens of the more than 300 confirmed cases reported this year in the city appear to be linked to wedding gatherings. One new case was reported in Beijing, where more than ten communities and villages have been placed under lockdown, and one in the northeastern Heilongjiang Province, bringing the total number of cases in China to 87,591 with 4,634 deaths.
This outbreak comes amid measures to limit the spread of the virus further during the Chinese New Year holiday next month. The authorities called on citizens not to travel, ordered schools to close their doors a week ago and conducted tests on a large scale. WHO scientists are scheduled to arrive in China on Thursday to investigate the origin of the coronavirus, which was first discovered in Wuhan in late 2019.
Japan, too, ordered restrictions and closures to contain the rapid spread of the virus, after a period in which the country boasted of success in stemming the outbreak.
Technical analysis of the pair:
According to the performance on the daily chart, the USD/JPY remains in the range of its descending channel after its recent gains, and there will be no change in direction without breaching the 106.00 resistance level. Bears still have the opportunity to bounce back as anxiety in the markets increases the chances of gains for the safe havens, the Japanese yen chief among them. Therefore, it is not unlikely that the currency pair will return to the support areas of 103.70, 103.00 and 102.55. Nevertheless, I still prefer to buy the currency pair from every downward level, as the technical indicators are still in the range of oversold areas. With the economic calendar devoid of important releases, investor risk appetite will have the strongest reaction to the performance of the currency pair.