• USD/JPY dropping in thin trade without a known catalyst.
• Yen is picking up a bid amid an underbelly of risk.

USD/JPY is moving lower and testing 106.20 lows and the lowest levels since March of earlier this year. The move started overnight in the European session since topping in the 106.80s. At the time of writing, USD/JPY has traded between 106.20 and 106.60.

There have been no particular catalysts as far as the eye can see for the sudden spike in the yen, but the case for risk-off has been building, with small steps up a mountain of headwinds. From risks of a second wave of COVID-19 as nations seek to mobilise their populations again and get businesses back to work to escalating trade tensions between the US and China. 

US data in focus

Meanwhile, the data overnight in the US shows an economy in decline. "US non-manufacturing ISM fell to 41.8 from 52.5 (slightly higher than expected). The business activity index fell to a record low of 26.0, from 48.0, and there were also sharp declines in the new orders (to 32.9 from 52.9) and employment (to 30.0 from 47.0) components," analysts at Westpac explained. 

For the US April ADP employment change, Westpac expects that a record-breaking 22 million private-sector jobs will be reported lost over a month. As a stark contrast, the March print came in at -27k. Later in NY trade, Atlanta Fed President Bostic will discuss the response to the virus," the analysts at Westpac note.

USD/JPY levels

• USD/JPY Forecast: Slowly approaching the 106.35 support level