USD/JPY welcomes October with mixed clues above 105.00

• USD/JPY bounces off 105.40 following its declines from 12-day high the previous day.
• Stimulus talks combat political uncertainty and virus woes.
• Japan’s Tankan Large Manufacturing Index dropped to -27 in Q3.
• Stocks trading halted due to a technical problem at exchanges.

USD/JPY rises to 105.50 as markets in Japan open for Thursday’s trading. The yen pair surged to the highest since September 15 the previous day before tanking to 105.45. However, the recent risk-on mood, downbeat data from Japan seem to trigger the pair’s pullback.

Another burden on the volatility…

While China’s off is already weighing on the Asian market moves, a halt in stock trading on Japanese bourses adds barriers to the moves. Also challenging the momentum traders is a light new feed.

Even so, the recent releases of Tankan Manufacturing and Industry numbers for the third quarter (Q3) helped the pair to trim Wednesday’s losses. Tankan Large Manufacturing Index dropped below -23 forecast to -27 in the last quarter whereas Tankan Large All Industry Capex grew past-1.3% expected to 1.4% during the reported period. Moreover, Japan’s Jibun Bank Manufacturing PMI for September rose above 47.3 prior to 47.7.

Talking about the risks, US policymakers are inching closer to the much-awaited stimulus despite failing to agree on Wednesday. The American Congress even passed a stopgap funding bill to let the government work after the previous deadline expired on September 30. Further, the coronavirus (COVID-19) risk pushes the UK towards national lockdown amid a lack of major progress at the vaccine front.

At home, Nikkei came out with the news suggesting the government’s readiness for further stimulus. It should additionally be noted that Japanese Prime Minister Suga recently turned down calls for a snap election and triggered skepticism as the politician earlier cheered this idea.

Amid all these catalysts, S&P 500 Futures rise 0.25% to 3,360 while the US 10-year Treasury yields also stay positive around 0.68%.

With a lack of major catalysts, USD/JPY traders will keep eyes on the risk headlines ahead of the US session that carries the weekly Jobless Claims and the September month ISM Manufacturing PMI.

Technical analysis

Failures to cross 50-day SMA, at 105.75 now, can push USD/JPY back to 10-day SMA retest, currently around 105.25.