The Dollar Yen pair was muted as FX volatility eased with the focus on the oil and asset markets. USD/JPY traded in a relatively narrow range of 107.514-107.937, finishing at 107.75 which is where it started yesterday. While the Yen is traditionally a safe-haven currency, the US Dollar has taken much of that away from the Japanese currency. Japan has also seen a setback in its battle against the Covid-19 outbreak with a rise in confirmed cases and related deaths. Japanese Prime Minister Shinzo Abe expanded a state of emergency to the whole country recently as the country rushed to expand testing.

This is a real threat to the country and the economy and cannot be beneficial for the Japanese currency. USD/JPY has immediate resistance at 108.00 followed by 108.50 and 109.00. Immediate support can be found at 107.50 and 107.20. The latest Commitment of Traders report (week ended 14 April) saw net speculative JPY long bets at +JPY 22,645 (short USD), little changed from the previous week. Market positioning also supports a bid USD/JPY. Look to buy dips in a likely range today of 107.50-108.50. Expect volatility in this currency pair to pick up.