USD/JPY: Risk off, mixed Japanese data probe bounce off monthly low near 104.50

• USD/JPY fades pullback from recent low while wobbling around intraday bottom.
• Japan’s Tokyo CPI slips below 0.0% forecast to -0.3% in October, Industrial Production defies recovery hopes.
• US aid package stalemate, virus woes weigh risks.

USD/JPY takes a U-turn from the recently refreshed intraday low of 104.49 to 104.60, before revisiting 104.55, amid the initial minutes of Friday’s Tokyo trading. Even so, the pair’s latest move struggles to keep the previous day’s recovery moves from September 21 low. The reason could be spotted in mixed data from Japan as well as challenges to the risks.

More troubles for BOJ…

Not only the weakness in headline Japanese inflation numbers for October but the downbeat reading of the preliminary Industrial Production for September also favors the USD/JPY buyers. Though, the weakness in September’s Unemployment Rate joins the ongoing risk aversion wave to challenge the bulls.

Tokyo Consumer Price Index (CPI) dropped below 0.0% market consensus and 0.2% prior to -0.3% while CPI ex-Food, Energy recovered versus -0.3% expected to -0.2%. Further, Industrial Production slumped below -7.2% forecast to -9.0% YoY while rising 4.0% against 3.2% expectations on MoM during the previous month. Additionally, Japan’s Unemployment Rate for September recovered from 3.1% market expectations to reprint the 3.0% mark. The data can increase the Bank of Japan's (BOJ) troubles amid the calls of having no major weapon than the negative rates to combat the covid-led economic fears.

On the other hand, clues that the US coronavirus (COVID-19) stimulus talks will take longer than expected join the increased fears of the pandemic-led national lockdowns in Europe to weigh on the risks. While portraying the same, S&P 500 Futures drop nearly 30 points, or 0.90%, intraday by press time.

Considering the recent strength of the virus wave 2.0, coupled with uncertainty surrounding the American aid package and the US presidential election, the US dollar is likely to keep its latest strength. As a result, the USD/JPY buyers may look for entries during the further upside.

Technical analysis

Sustained clearance of the eight-day-old falling trend line, at 104.40 now, can direct short-term USD/JPY buyers towards the 105.00 threshold. Though, any further upside will be challenged by a three-week-long falling trend line, currently around 105.50. Meanwhile, fresh selling will wait for a clear downside break of the September month’s low of 104.00.