FxWirePro: USD/JPY erases early gains, retraces below 106 handle as Fitch revises US outlook to negative from stable

USD/JPY chart - Trading View 

USD/JP has erased early gains and has once again slipped below 106 handle as Fitch rating agency revises US outlook to negative from stable. 

The outlook has been revised to negative due to the ongoing deterioration in the US public finances and the absence of a credible fiscal consolidation plan, Fitch’s report said.

Slight beat in Japan Q1 revised real GDP failed to keep the pair supported. Growing concerns that the US stock market rally may be overdone is adding downside pressure. 

Data from the Cabinet Office showed on Monday that Japan's Q1 revised real GDP confirmed at -0.6% Q/Q (2nd prelim -0.6%, Reuters poll -0.7%).

On an annualised basis, Q1 GDP stood at 2.2% in January-March, unchanged after a second revision (poll -2.8%).

Further, a new US coronavirus stimulus package has stalled as Republicans and Democrats remain in a deadlock.

Traders cautious as Japanese authorities on Friday said that the BoJ will remains vigilant on FX moves. 

The pair trades with a bearish bias. Recovery stalls at major resistance at 21-EMA (currently at at 106.31).

Break below 5-DMA will see resumption of downside. Scope for test of 'Channel Base' at 103.80.