USD/JPY Price Forecast – US Dollar Rallies Towards 50 Day EMA

The US dollar has rallied a bit during the trading session on Tuesday, reaching towards the 50 day EMA. The 50 day EMA is an indicator that a lot of people have been paying attention to for the last several months, as it is dynamic resistance. The fact that the candlestick broke above the ¥105.50 level suggests that perhaps there is more of a “risk on” feel to the market during the day, but we have seen this happen multiple times and therefore it is only a matter of time before we probably rollover again. After all, the US dollar is still in the crosshairs of potential stimulus, so that in and of itself could cause the greenback to pull back a bit.

USD/JPY Video 21.10.20

Ultimately, this is a pair that seems like it is trying to build up the necessary momentum to finally break down below the ¥105 level. Breaking down below there opens up the possibility of a move down to the ¥104 level, followed by a break down to the ¥102 level. With the bonds in Japan offering more yield than in the United States, that is another reason we have been seeing this market drift lower.

That being said, there are a lot of questions out there as to whether or not we are in a “risk on” or possible “risk off” type of environment, so that will continue to cause issues. That being said, I have found the easiest way to trade this market lately has been to simply short signs of exhaustion on smaller time frames for smaller positions.

For a look at all of today’s economic events, check out our economic calendar.

A Quiet Economic Calendar Leaves U.S Politics, COVID-19, and Brexit in Focus

Earlier in the Day:

It’s was a relatively quiet start to the day on the economic calendar this morning. The Kiwi Dollar and Aussie Dollar were in action early on, with the PBoC also in the spotlight.

Away from the economic calendar, the markets also responded to the lack of progress on Capitol Hill.

For the Kiwi Dollar

In the 3rd quarter, the NZIER Business Confidence

According to the NZIER Quarterly Survey of Business Opinion,

  • A net 40% of firms expect business conditions to deteriorate in the 3rd quarter, compared with 63% in the previous quarter.
  • The building sector was the most confident, with a net 7% of firms expecting an improvement in the economy near-term.
  • Other sectors were more cautious. While manufacturers were less pessimistic, the service sector was the most pessimistic. A net 49% of services firms expect a worsening in general economic conditions in the coming months.
  • Uncertainty continues to plague the services sector after the adverse effects of lockdown and border restrictions.

The Kiwi Dollar moved from $0.66047 to $0.66027 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.30% to $0.6586.

For the Aussie Dollar

The RBA monetary policy meeting minutes drew interest early this morning.

Salient points from the minutes included:

  • Members observed that the global economy was recovering but that most economies were still some way off pre-pandemic output levels.
  • The continuation of the recovery was dependent upon the containment of the virus.
  • China’s economic recovery was the most advanced, while globally, inflation remained very low and below central bank targets.

Domestically,

  • While Australia saw its largest economic contraction since the 1930s, members noted that the decline in output had been smaller than expected.
  • Labour market conditions had improved, with the unemployment rate likely to peak at a lower rate than previously expected.
  • The RBA expects both unemployment and underemployment to remain high for an extended period of time.
  • Members considered that the economy would need fiscal and monetary support for some time.
  • Members also noted that the effects of monetary policy easing had been impaired as a result of restrictions on activity in parts of the economy.
  • As the economy opens up, however, members considered it reasonable to expect further monetary policy easing to gain more traction.
  • The Board also considered the nature of the forward guidance regarding the cash rate. Given the higher level of uncertainty about inflation dynamics, the Board agreed to place more weight on actual, not forecast, inflation for its decision-making.
  • Members also indicated that they would like to see more than just progress towards full employment before considering an increase in the cash rate.

The Aussie Dollar moved from $0.70559 to $0.70582 upon release of the minutes. At the time of writing, the Aussie Dollar was down by 0.44% to $0.7043.

Out of China

The markets are expecting that the PBoC will leave Loan Prime Rates unchanged this morning. Currently, the 1-year LPR sits at 3.85%, with the 5-year at 4.65%.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.10% ¥105.54 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a quiet day ahead on the economic calendar. Wholesale inflation figures for September are due out of Germany.

We don’t expect too much influence on the EUR, however, with COVID-19 numbers and any Brexit chatter in focus.

At the time of writing, the EUR was up by 0.02% to $1.1771.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out to provide the Pound with direction.

The lack of stats will leave any further chatter on Brexit and updates on COVID-19 in focus.

While Downing Street announced an end to negotiations, the markets are expecting talks to resume. Boris Johnson left the door open for further talks, though it remains to be seen whether the EU will compromise…

At the time of writing, the Pound was flat at $1.2948.

Across the Pond

It’s a relatively quiet day ahead for the U.S Dollar.

September building permits and housing starts are due out later this afternoon.

Barring particularly dire numbers, we would expect the markets to brush aside the numbers.

The focus will be on the U.S Presidential Election polls, the Senate polls, and chatter from Capitol Hill.

Expect updates on COVID-19 to also influence on the day.

At the time of writing, the Dollar Spot Index was down by 0.02% to 93.404.

For the Loonie

It’s a particularly quiet day ahead. There are no key stats due out of Canada to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of COVID-19 and U.S politics on the day. A continued rise in new COVID-19 cases will continue to test support for the Loonie.

At the time of writing, the Loonie was up by 0.02% to C$1.3190 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Price Forecast – US Dollar Continues to Show Exhaustion

The US dollar initially tried to rally during the trading session on Monday but gave back the gains as we continue to see a pressing lower. In fact, it is very likely that the market is trying to build up enough pressure to finally break down below the ¥105 level. That being said, the market is likely to see noisy trading more than anything else, but we are in a downtrend, and therefore I have no interest in trying to buy this pair.

USD/JPY Video 20.10.20

When you look at the pair, the Japanese yen has been strengthening over time, but it is a very choppy and slow move. This is because both of these are considered to be safety currencies, but ultimately the market is likely to go looking towards the ¥104 level underneath, which has been the recent bounce. Ultimately, I do think that we go through there and go looking towards the ¥102 level. The market may take some time to make that move, but ultimately, we are clearly forcing ourselves lower.

The Japanese bond markets are paying more of a return than the US bond markets, and what looks to be like an alternate reality for anybody who has been in the Forex game for more than about 20 minutes. With this, we continue to see downward pressure on the US dollar due to the massive amount of stimulus that people are expecting in America as well.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Fundamental Weekly Forecast – Combination of No Stimulus, Weak Risk Appetite Keeping Prices in Check

The Dollar/Yen edged lower last week as the tug of war continued between these two safe-haven assets. In watching the price action, one probably observed that the U.S. Dollar strengthened when the fiscal stimulus talks reached another stalemate, and the Japanese Yen rose on stock market weakness. We expect to see this type of price action to continue this week and possibly into the U.S. Presidential election on November 3.

Last week, the USD/JPY settled at 105.405, down 0.225 or -0.23%.

In other news, Bank of Japan (BOJ) Governor Haruhiko Kuroda stressed a week ago this readiness to take additional monetary easing steps, saying the central bank had not run out of tools to cushion the economic blow from the COVID-19 pandemic.

Kuroda said Japan’s economy had hit the bottom in April-June and that the general picture looked ‘much better” than a few months ago, with exports, output and capital expenditure ‘fairly robust,” Reuters reported.

But consumption, particularly for services, was quite weak and likely to stay so far some time, unless the world gets hold of an effective vaccine to contain COVID-19, he added.

“We will closely monitor the impact of COVID-19 and not hesitate to take additional easing measures as necessary,” Kuroda told an online seminar hosted by the Institute of International Finance.

“The BOJ hasn’t run out of policy tools. We have a lot of policy tools to counter (the damage from COVID-19). We are flexible, innovative when considering measures to take.”

Kuroda also said Japan’s inflation rate would likely remain negative for some time as COVID-19 suppressed consumer demand “considerably”. But he added that prices would likely rebound next year as the economy recovered.

He also defended the BOJ’s negative interest rate policy, saying the -0.1% rate was imposed on only a limited portion of commercial banks’ reserves parked with the central bank.

“We maintain 10-year JGB yields around zero. But at the same time, 20-, 30- 40- year JGB yields are quite positive,” Kuroda said. “We have been allowing longer-term interest rates to move in a positive range. That would certainly help pension funds, life insurance companies and institutional investors.’

Weekly Forecast

All eyes will remain on a possible U.S. fiscal stimulus deal and risk appetite. New stimulus is coming, but probably not ahead of the election. If the White House, Republicans and Democrats can’t reach an agreement then look for a smaller package shortly after the election on November 3.

If Joe Biden wins the election then look for an even bigger stimulus deal early next year.

Negative fiscal stimulus news will be supportive for the U.S. Dollar because this will mean fewer greenbacks floating around in the system. A weaker U.S. stock index will likely pressure the USD/JPY as this would boost the safe-haven appeal of the Japanese Yen.

For a look at all of today’s economic events, check out our economic calendar.

Riskier Assets Find Support, with China Stats, COVID-19, and U.S Politics in Focus

Earlier in the Day:

It’s was a particularly busy start to the day on the economic calendar this morning. The Japanese Yen was in action early on, with economic data from China also in focus. Away from the economic calendar, U.S politics and COVID-19 were also in focus.

Positive chatter from Capitol Hill and hopes of a COVID-19 vaccine supported riskier assets early on.

Nancy Pelosi raised hope of a pre-Election Stimulus Bill over the weekend, while also setting a deadline for talks.

At the end of last week, U.S Pharma Phizer talked of having a COVID-19 vaccine ready before the end of the year.

For the Japanese Yen

Japan’s trade surplus widened from ¥248.6bn to ¥675.0bn in September. Economists had forecast a widening to ¥989.8bn.

According to figures released by the  Ministry of Finance,

  • Exports fell by 4.9% when compared with September 2019.
    • Exports to China jumped by 14.0%, while down by 2.0% to Asia.
    • Exports to the U.S rose by just 0.7%, while exports to Western Europe fell by 6.4%.
  • Imports tumbled by 17.2% when compared with September 2019.
    • Imports from China slid by 11.9% while falling by 12.6% from Asia.
    • From the U.S, imports fell by 9.9%, with imports from Western Europe sliding by 14.4%.

The Japanese Yen moved from ¥105.426 to ¥105.443 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.01% ¥105.41 against the U.S Dollar.

Out of China

3rd quarter GDP, fixed asset investment, industrial production, retail sales, and unemployment figures were in focus this morning.

In the 3rd quarter, China’s economy grew by 2.7%, quarter-on-quarter, following 11.5% growth in the 2nd quarter. Year-on-year, the economy expanded by 4.9%, following 3.2% growth in the 2nd quarter. Economists had forecasted growth of 3.2% and 5.2% respectively.

Industrial production increased by 6.9%, year-on-year, in September, following a 5.6% rise in August. Economists had forecast a 5.8% increase.

Retail sales increased by 3.3%, following a 0.5% increase in August. Economists had forecast a 1.8% rise.

The unemployment rate declined from 5.6% to 5.4% in September, which was better than a forecasted decline to 5.5%.

The Aussie Dollar moved from $0.71031 to $0.70961 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.27% to $0.7100.

Elsewhere

At the time of writing, the Kiwi Dollar was up by 0.30% to $0.6622.

The Day Ahead:

For the EUR

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the Eurozone to provide the EUR with direction.

A lack of stats leaves the EUR in the hands of COVID-19 and any further chatter on Brexit.

With lockdown measures being introduced in Europe, any further steps to contain the virus will test EUR support.

At the time of writing, the EUR was down by 0.05% to $1.1712.

For the Pound

It’s also a quiet day ahead on the economic calendar. There are no material stats due out to provide the Pound with direction.

A lack of stats will leave the markets to react to any Brexit chatter and COVID-19 news.

Further COVID-19 restrictions are expected on Monday, which would be Pound negative.

At the time of writing, the Pound was up by 0.10% to $1.2928.

Across the Pond

It’s a quiet day ahead for the U.S Dollar.

With no material stats due out of the U.S, the focus will be on Capitol Hill and the U.S elections.

The markets are looking for a clean sweep, which will bring the Senate elections into focus. As Biden leads Trump in the Presidential Election polls, the Democrats will need to stay ahead in the senate polls to support riskier assets.

On Capitol Hill, any hint of progress towards a COVID-19 stimulus Bill would also support riskier assets on the day.

At the time of writing, the Dollar Spot Index was up by 0.02% to 93.697.

For the Loonie

It’s a relatively quiet day ahead. Key stats due out of Canada include August wholesale sales figures.

We don’t expect too much influence on the Loonie, however. COVID-19 news updates and market sentiment towards the economic outlook and demand for crude will remain the key drivers.

At the time of writing, the Loonie was up by 0.09% to C$1.3177 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Fundamental Daily Forecast – Traders Eyeing Risk Appetite for Direction

The Dollar/Yen inched lower on Friday while posting a second consecutive inside move. The price action suggests investor indecision and impending volatility. Fundamentally, it may mean it’s a toss-up between those who favor the U.S. Dollar for safe-haven protection and those who want to park their assets in the Japanese Yen for safety.

On Friday, the USD/JPY settled at 105.405, down 0.010 or -0.01%.

The tight price action on Friday reflected the tone for the week, whereby, the dollar and the Japanese Yen both posted weekly gains against the major currencies as investor appetite for safe-haven assets, or 0.7% and 0.4% respectively.

Driving investors into the safe-haven currencies was growing market caution over a global surge in coronavirus cases and fading prospects of a U.S. stimulus package before the November 3 election.

Meanwhile, fresh curbs to combat COVID-19 have been introduced across Europe while the U.S. Midwest is also battling record spikes in new cases as data shows the country’s economic recovery is losing steam, Reuters wrote.

US Retail Sales Improved in September

The government reported on Friday that U.S. retail sales accelerated in September, rounding out a strong quarter of economic activity, Reuters reported.

Retail sales jumped 1.9% last month as consumers bought motor vehicles and clothing, dined out and splashed out on hobbies. That followed an unrevised 0.6% increase in August.

Economists polled by Reuters had forecast retail sales would rise 0.7% in September. Some said September’s surge was likely exaggerated by difficulties stripping seasonal fluctuations from the data after the shock caused by COVID-19. Unadjusted retail sales fell 2.8% after dropping 1.0% in August.

Excluding automobiles, gasoline, building materials and food services, sales increased 1.4% last month after a downwardly revised 0.3% drop in August.

US Industrial Output Declines Unexpectedly in September

Industrial Production fell for the first time in five months in September, surprising economists who had expected more steady growth from the factory sector. Industrial output fell 0.6% in September, the first decline after four straight months of gains, the Federal Reserve reported Friday. The decline was well below Wall Street expectations of a 0.4% gain, according to a survey by MarketWatch.

Short-Term Outlook

We expect the FX markets to continue to be dominated by risk considerations, which means the U.S. Dollar and Japanese Yen are likely to maintain their safe-haven appeal.

The direction of the global equity markets could ultimately determine the next substantial move in the USD/JPY. Last week, the inability to reach a fiscal stimulus package seemed to give the USD/JPY a boost, while weakness in the equity markets pressured the Dollar/Yen. We expect these reactions to continue over the short-run.

With the chances of a stimulus deal by November 3 are nearly impossible, we think the price action in the USD/JPY is likely to be largely influenced by demand for riskier assets over the near-term.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – U.S Politics, COVID-19, Brexit, and Private Sector PMIs in Focus

On the Macro

It’s a busy week ahead on the economic calendar, with 57 stats in focus in the week ending 23rd October. In the week prior, 56 stats had been in focus.

For the Dollar:

It’s a relatively quiet week ahead on the economic data front.

On Tuesday, Wednesday, and Thursday, housing sector figures for September are in focus.

With mortgage rates hovering close to historic lows, the numbers are unlikely to have a material impact on the Dollar.

On Thursday, however, U.S jobless claims figures will influence ahead of private sector PMIs on Friday.

October’s prelim services, manufacturing, and composite PMIs are due out at the end of the week.

Expect the Services PMI to be the key driver. The markets will be looking for a pickup in service sector activity…

Away from the economic calendar, we are just over 2-weeks away from the U.S Presidential Election. Wednesday’s final live televised Presidential debate will garner plenty of attention as will chatter from Capitol Hill. We can also expect increased interest in the Senate Election polls.

The Dollar Spot Index ended the week up by 0.67% to 93.682.

For the EUR:

It’s also a relatively busy week ahead on the economic data front.

On Tuesday, German wholesale inflation figures are due out ahead of a busier 2nd half of the week.

On Thursday, Germany is back in focus, with November consumer climate figures due out.

Prelim October private sector PMIs from France, Germany, and the Eurozone will be the key drivers on Friday, however.

We can expect plenty of sensitivity to the numbers. A new spike in new COVID-19 cases in France and other parts of the EU may have impacted activity at the start of the quarter.

Away from the economic calendar, Brexit and COVID-19 will need monitoring throughout the week.

The EUR/USD ended the week down by 0.91% to $1.1718.

For the Pound:

It’s a busy week ahead on the economic calendar.

The markets will have to wait until Wednesday, however, for the first set of numbers.

Inflation figures for September are due out ahead of CBI industrial trend orders on Thursday.

We would expect the Pound to be sensitive to the inflation figures ahead of a busy end to the week.

On Friday, retail sales figures for September and prelim October private sector PMIs will provide direction.

With the BoE open to negative rates, dire numbers will test support for the Pound.

Of greater influence in the week, however, will be Brexit and COVID-19 news.

The GBP/USD ended the week down by 0.93% to $1.2915.

For the Loonie:

It’s a relatively busy week ahead on the economic calendar.

At the start of the week, wholesale sales figures for August are in focus on Monday.

We don’t expect too much influence from the numbers, however.

On Wednesday, September inflation and August retail sales figures will provide direction.

From elsewhere, expect GDP numbers from China and prelim private sector PMIs from the Eurozone and the U.S to also influence.

Away from the economic calendar, risk appetite will likely be dictated by COVID-19 and the U.S Presidential Election polls. There’s also the final presidential debate to consider on Wednesday.

The Loonie ended the week down by 0.52% to C$1.3189 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a particularly quiet week ahead on the economic calendar.

There are no material stats due out of Australia to provide the Aussie with direction.

The lack of stats will leave the Aussie Dollar firmly in the hands of market risk sentiment in the week.

Expect China’s GDP numbers and prelim PMIs from the Eurozone and the U.S to influence

On the monetary policy front, the RBA meeting minutes at the start of the week will garner interest. There has been the talk of an RBA move next month, the minutes could reveal what is on the cards…

The Aussie Dollar ended the week down by 2.20% to $0.7081.

For the Kiwi Dollar:

It’s also a relatively busy week ahead on the economic calendar.

In the 1st half of the week, 3rd quarter business confidence figures are due out. A pickup in confidence would provide support to the Kiwi ahead of a busy Friday.

Trade data for May and 3rd quarter inflation figures will influence at the end of the week.

While the stats will provide direction, however, economic data from China and COVID-19 will likely be the key drivers.

The Kiwi Dollar ended the week down by 0.96% to $0.6602.

For the Japanese Yen:

It is a relatively quiet week on the economic calendar.

Trade data for September will draw interest at the start of the week ahead of inflation at the end of the week.

We don’t expect the numbers to have too much influence on the Yen, however.

The key driver for the Japanese Yen, however, will be COVID-19 news and U.S politics.

The Japanese Yen ended the week up by 0.21% to ¥105.40 against the U.S Dollar.

Out of China

It’s a busy week ahead on the economic data front.

3rd quarter GDP numbers due out on Monday will be the key driver for the Yuan and market risk sentiment.

September’s industrial production, retail sales, and unemployment figures will also influence.

Barring particularly dire numbers, the fixed asset investment numbers should have a muted impact.

On the monetary policy front, the PBoC is in action on Tuesday. The markets are expecting the PBoC to leave loan prime rates unchanged. Any unexpected rate cut could spook the markets…

The Chinese Yuan ended the week down by 0.04% to CNY6.6976 against the U.S Dollar.

Geo-Politics

UK Politics:

On Friday, Boris Johnson announced that Brexit negotiations were over. Downing Street added the EU chief negotiator Barnier does not need to return to London in the week ahead.

Following the EU’s attempts to leave the ball in Britain’s court, with Fisheries a key issue, it now rests with the EU to compromise. Johnson has been clear that it would not leave fishing access unchanged, despite Macron’s attempts to strong-arm Britain into yielding.

For French fishermen, it would ultimately mean no access to UK fisheries should Britain leave without a deal…

Also at the start of the week, the British Prime Minister is due to announce more containment measures. With the number of new COVID-19 cases continuing to rise, further restrictions would be Pound negative.

U.S Politics

After last week’s individual town hall sessions, the final live televised debate will take place on Wednesday.

It will be a chance for Trump to narrow the gap ahead of the 3rd November Election.

If past performance is any indicator of future performance, however, it could just give Biden a greater edge.

As the markets begin to write-off a Trump victory, the focus will likely shift to the Senate Elections.

A blue wave is expected that would support further stimulus in the New Year.

The Weekly Wrap – Brexit, COVID-19, and U.S Politics Drive the Majors

The Stats

It was a busier week on the economic calendar, in the week ending 16th October.

A total of 56 stats were monitored, following 43 stats from the week prior.

Of the 56 stats, 24 came in ahead of forecasts, with 21 economic indicators came up short of forecasts. 11 stats were in line with forecasts in the week.

Looking at the numbers, 20 of the stats also reflected an upward trend from previous figures. Of the remaining 36 stats, 27 reflected a deterioration from previous.

For the Greenback, it was back into the green after 2 consecutive weeks in the red. The Dollar Spot Index rose by 0.67% to 93.682. In the week ending 9th October, the Dollar Spot Index had fallen by 0.87% to 93.057.

Market risk appetite waned in the week. There were a number of factors driving demand for the Dollar. A lack of progress towards a U.S stimulus bill and a spike in COVID-19 cases were front and center in the week.

Disappointing economic data and Brexit woes also supported the demand for the safety of the Dollar.

Out of the U.S

It was a relatively busy week on the economic data front.

Inflation figures drew interest early in the week. In the 2nd half of the week, however, jobless claims and retail sales figures were the key drivers. Prelim October consumer sentiment figures were also in focus late on Friday.

In the week ending 9th October, initial jobless claims stood at 898k, which was up from 845k from the week prior. The numbers reinforced the view that the labor market recovery had stalled.

A combination of dire labor market conditions, rising new COVID-19 cases, and a lack of further stimulus was a bad combination.

At the end of the week, retail sales impressed, however. In September, retail sales rose by 1.9%, with core retail sales rising by 1.5%. Economists had forecasted increases of 0.5% and 0.7% respectively.

Aligned with the retail sales figures was a further pickup in consumer sentiment. The Michigan Consumer Sentiment Index rose from 80.4 to 81.2 in October, according to prelim figures. The Expectations Index increased from 75.6 to 78.8.

The only negative on the day was an unexpected 0.6% fall in industrial production.

In the equity markets, the NASDAQ rose by 0.79%, with the Dow and S&P500 gaining 0.07% and 0.19% respectively.

Out of the UK

It was a relatively busy week on the economic data front.

Key stats included August unemployment rate and employment change and September claimant count figures.

While claimant counts came in lower than expected, employment fell by more than expected over the 3-months to August.

A 153k fall in employment led to an increase in the unemployment rate from 4.1% to 4.5%.

While the stats provided direction, it was ultimately Brexit and COVID-19 that sank the Pound in the week.

A continued rise in new COVID-19 cases and a new round of containment measures were Pound negative.

More significantly, however, was a lack of progress towards a Brexit agreement, with the EU pushing for more talks next week.

On Friday, Boris Johnson announced that it was time to prepare for a no-trade deal Brexit unless the EU changed its stance. Downing Street also stated that there was no point in EU negotiator Michel Barnier returning to London in the week ahead.

In the week, the Pound fell by 0.93% to $1.2915. In the week prior, the Pound had risen by 0.78% to $1.3036.

The FTSE100 ended the week down by 1.61%, partially reversing a 1.94% gain from the previous week.

Out of the Eurozone

It was a relatively busy week on the economic data front.

Early in the week, key stats included ZEW Economic Sentiment figures for the Eurozone and Germany.

The indicators flashed red for October. Germany’s Economic Sentiment Indicator fell from 77.4 to 56.1, with the Eurozone’s falling from 73.9 to 52.3. A lack of progress on Brexit and jitters over the U.S Presidential Election weighed in October.

Mid-week, industrial production figures for the Eurozone came up short of expectations, rising by just 0.7%. In July, production had jumped by 5.0%.

In the 2nd half of the week, Eurozone trade data and finalized inflation figures for September were in focus.

Inflation figures reaffirmed market concern over deflationary pressures. Trade data also failed to impress, with the Eurozone’s trade surplus narrowing from €27.9bn to €14.7bn in August.

While the stats provided direction, a marked increase in new COVID-19 cases weighed on the EUR in the week. France and other member states were forced to reintroduce containment measures amidst the 2nd wave.

For the week, the EUR fell by 0.91% to $1.1718. In the week prior, the EUR had risen by 0.94% to $1.1826.

For the European major indexes, it was a bearish week. The CAC40 and EuroStoxx600 fell by 0.22% and by 0.77% respectively, with the DAX30 declining by 1.09%.

For the Loonie

It was a quiet week on the economic data front.

Key stats included August’s foreign security purchases and manufacturing sales figures.

Neither set of numbers had an impact, however, as the fresh spike in new COVID-19 cases weighed on market risk sentiment.

The threat of a reintroduction of lockdown measures pegged back crude oil prices in the week.

In the week ending 16th October, the Loonie fell by 0.52% to end the week at C$1.3189. In the week prior, the Loonie had risen by 0.87%.

Elsewhere

It was a bearish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 16th October, the Aussie Dollar slid by 2.20% to $0.7081. The Kiwi Dollar ended the week down by a more modest 0.96% to $0.6602.

For the Aussie Dollar

It was a relatively quiet week on the economic calendar.

Key stats consumer confidence and employment figures.

It was a mixed bag for the Aussie Dollar. While consumer confidence continued to improve, employment figures were somewhat disappointing.

The unemployment rate rose from 6.8% to 6.9%, driven by a 29.5k fall in employment.

For the Aussie Dollar, it was ultimately market sentiment towards monetary policy and risk aversion that did the damage. There is the talk of an RBA next month…

For the Kiwi Dollar

It was a relatively quiet week on the economic calendar.

Key stats included electronic card retail sales figures and business PMI numbers.

The stats were Kiwi Dollar positive, with retail sales up by 5.4% and the PMI rising from 50.7 to 54.0.

While positive, however, market risk aversion pegged the Kiwi Dollar back in the week.

For the Japanese Yen

It was also a relatively quiet week on the economic calendar.

August’s core machinery orders and finalized industrial production figures were in focus.

The stats were skewed to the negative in the week. Core machinery orders rose by just 0.2%, following a 6.3% jump in July. Industrial production was revised down from 1.7% to 1.0%.

Ultimately, however, it was market risk sentiment that delivered the support for the Yen.

The Japanese Yen rose by 0.21% to ¥105.4 against the U.S Dollar. In the week prior, the Yen had fallen by 0.31%.

Out of China

It was a relatively busy week on the economic data front following last week’s holiday.

Key stats included September’s trade data and inflation figures, which were skewed to the negative.

China’s U.S Dollar trade surplus narrowed from $58.93bn to $37.00bn, driven by a 13.2% jump in imports. Exports rose by a more modest 9.9%.

Inflationary pressures also softened at the end of the quarter. China’s annual rate of inflation softened from 2.4% to 1.7% in September. Wholesale deflationary pressures picked up marginally. The producer price index fell by 2.1%, following a 2.0% decline in August.

In the week ending 16th October, the Chinese Yuan slipped by 0.04% to CNY6.6976. In the week prior, the Yuan had risen by 1.42%.

The CSI300 rose by 2.36%, with the Hang Seng gaining 1.11%.

USD/JPY Weekly Price Forecast – Conflicting Candlesticks Show Consolidation

The US dollar has initially fallen during most of the week to reach down towards the ¥105 level again. This is an area that has been supportive in the past, and now that we have recaptured it is likely that we are going to see a lot of choppiness, especially considering that the market looks a little bit like it is forming a hammer during the week, just as the previous week formed a bit of an inverted hammer, showing that we are going back and forth.

USD/JPY Video 19.10.20

Looking at this chart, if we can break down below the ¥105 level it is likely that we go down towards the ¥104 level. A breakdown below there then opens up the possibility of a move down to ¥102. Ultimately, this is a market that is moving on a couple of different reasons, not the least of which would be the stimulus package coming out the United States is probably going to be huge, and of course Japanese bonds are paying more in interest than American ones are, which is a complete surprise based upon historical norms.

That being said, I do think that there is plenty of resistance above, but we are in a relatively tight market, so it is probably going to continue to be short-term based more than anything else. I do favor the downside in general, but I also recognize that it might be a bit quiet between now and the presidential election as well as many other potential economic announcements. Looking at this chart, we have been grinding lower for quite some time and quite frankly nothing has changed.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Price Forecast – US Dollar Pulls Back

The US dollar pulled back a bit during the trading session on Friday as we head into the weekend. The ¥105 level is trying to offer a bit of support, just as we have seen it do in the past. However, we have broken through there are a couple of times and it is likely that we will probably do so again. This is due to the fact that there are two major drivers of this currency pair most of the time, and that is risk appetite and the 10 year yields of both countries.

USD/JPY Video 19.10.20

The market has been grinding lower for some time, and now that we are reaching towards the ¥105 level multiple times. We have seen the market go as low as ¥104, and I do think that it is probably where we end up going towards again. Looking at this chart, I also see that the 50 day EMA has offered significant resistance, and that it extends all the way to the 200 day EMA above there. In fact, that is a major “zone of resistance.”

If we were to break down below the ¥104 level, then it is likely that we will continue to see a market reach towards the ¥102 level. The market had seen a major bounce from there previously, so I think that might be the longer-term target. In fact, you can make an argument that we are forming a descending triangle, and that descending triangle actually measures for a move down to ¥102 level if you protect the trendlines going forward. Ultimately, the grind lower favors the Japanese yen for not only the possibility of stimulus in the United States, but also the fact that the bond markets are seeing more of a return in Japan.

For a look at all of today’s economic events, check out our economic calendar.

Brexit, U.S Stimulus Talks, and Economic Data Put the Pound and the Dollar in Focus

Earlier in the Day:

It’s was a relatively quiet start to the day on the economic calendar this morning. The Kiwi Dollar was in action early on.

Away from the economic calendar, updates on Brexit and U.S stimulus talks were also in focus as the markets responded to disappointing economic data from the U.S.

For the Kiwi Dollar

In September, the Business PMI rose from 50.70 to 54.0. In August, the PMI had fallen from 58.8 to 50.7.

The Kiwi Dollar moved from $0.66015 to $0.65993 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.02% to $0.6599.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.08% ¥105.37 against the U.S Dollar, while the Aussie Dollar was down by 0.08% to $0.7088.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Key stats include finalized September inflation figures for Italy and the Eurozone and August trade figures for the Eurozone.

Barring a marked downward revision to Eurozone inflation figures, however, the stats should have a muted impact on the EUR.

Away from the economic calendar, COVID-19 news and Brexit will remain key drivers on the day.

At the time of writing, the EUR was down by 0.02% to $1.1706.

For the Pound

It’s a quiet day ahead on the economic calendar. There are no material stats due out to provide the Pound with direction.

A lack of stats will leave the markets to react further to the EU Summit. Covid-19 containment measures, announced in the week, will also test Pound support on the day.

Following a disappointing outcome to the EU Summit, where no progress was made, Boris Johnson is due to make a statement today. The deadline has now passed and no framework for an agreement is in place. Will the British PM pull the plug?

At the time of writing, the Pound was down by 0.05% to $1.2902.

Across the Pond

It’s another busy day ahead for the U.S Dollar.

Key stats include September retail sales and industrial production figures along with October consumer sentiment figures.

Expect the retail sales and consumer sentiment figures to be the key drivers on the day.

Away from the economic calendar, U.S politics, and updates from Capitol Hill will also influence on the day.

The Dollar Spot Index rose by 0.51% to 93.856 on Thursday.

For the Loonie

It’s a relatively quiet day ahead. Key stats due out of Canada include August manufacturing sales and foreign securities purchases.

Barring particularly dire numbers, however, we would expect the stats to have limited influence on the Loonie.

Expect updates on new COVID-19 cases and market risk sentiment to be the key drivers on the day.

At the time of writing, the Loonie was down by 0.03% to C$1.3225 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Price Forecast – US Dollar Presses Against Familiar Big Figure

The US dollar has gone back and forth during the trading session on Thursday as we tested the ¥105 level, an area that has of course been important, due to the fact that it is a large, round, psychologically significant figure in of course the fact that it is an area that we have seen a lot of action previously, so I think it makes quite a bit of sense that both buyers and sellers will be paying attention here. That being said, the analysis will not be any different than it has been in the past, as the 50 day EMA has offered a bit of a ceiling in the market.

USD/JPY Video 16.10.20

Furthermore, the most recent lows on spikes lower continue to be rather extreme, based upon risk appetite. The US dollar has been sold off repeatedly due to the fact that people are expecting stimulus, but then we have flipped the script, now people are starting to look at the possibility of more of a “risk off” type of environment. That also favor selling this pair, so it is a bit of a “double whammy” at the moment.

I have no interest in buying this pair, as we have seen not only a significant amount of selling pressure, and of course an obvious barrier between the 50 day and the 200 day EMAs. Ultimately, I like the idea of selling short-term rallies as this market continues to chop lower in general. Longer-term, we could start looking towards the ¥104 level, followed by the ¥102 level.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Fundamental Daily Forecast – Falling US Government Bond Yields Pressuring Prices

The Dollar/Yen is inching higher on Thursday after selling off the previous session as investors continue to juggle the two safe-haven assets. Yesterday’s weakness may have been part of overall weakness in the U.S. Dollar as other currencies also gained against the greenback.

Some days the dollar rallies against the Japanese Yen when stocks break and other days the move is reversed. On Wednesday, a high ranking government official just about killed any chance of a pre-election stimulus package. Last week, this news would’ve sent the U.S. Dollar higher, but yesterday, investors favored the Japanese Yen for protection.

At 06:45 GMT, the USD/JPY is trading 105.311, up 0.159 or +0.15%.

World Stocks Weaken on Pandemic Surge, Yen Gains on Safety Bid

Global stock markets mostly retreated on Wednesday as a record number of new coronavirus infections in parts of Europe led investors to shift away from risky assets to traditional safe havens such as the Japanese Yen.

Concerns that a resurgence in the COVID-19 pandemic could lead governments to again shut down economies spurred profit-taking, particularly after the recent stock market rally.

Pandemic uncertainties were compounded by news on Tuesday of halts to separate trials for a COVID-19 vaccine and a treatment, tempering a brief stock boost from U.S. investment bank Goldman Sachs Group’s strong earnings report, Reuters reported.

Remarks on Wednesday by U.S. Treasury Secretary Steven Mnuchin that a deal for more fiscal stimulus would not likely be reached before the November 3 elections also capped gains in shares.

“At this point getting something done before the election and executing on that would be difficult, just given where we are and the level of detail, but we’re going to try to continue to work through these issues,” Mnuchin said at  conference sponsored by the Milken Institute.

Next Dollar/Yen Move May Be Determined by Direction of Yields

On Wednesday, government bonds also benefited from investor caution. German bund yields, which move inversely to prices, hit their lowest since May. The 10-year U.S. Treasury yield dipped to 0.7256%, and the yield curve – the gap between two – and 10-year yields – flattened a touch on news that more U.S. fiscal stimulus was unlikely before the November 3 election.

When U.S. rates were well above Japanese yields, a drop in U.S. Government bond yields had a more significant influence on the USD/JPY. However, with U.S. yields so low, the affect isn’t that great on the Forex pair. Nonetheless, a possible inversion of the U.S. yield curve would be a significant event that could drive the USD/JPY sharply lower. It’s certainly something that has to be monitored.

Daily Forecast

Our work suggests the bias is to the downside for the USD/JPY, but we may have to put up with a few days of choppy trading because of technical support levels. However, crossing to the weak side of 105.056 then the recent bottom at 104.944 will indicate the selling is getting stronger. Our trigger point for an acceleration to the downside is 104.807. We’ll get a little nervous about the short side if buyers overcome 105.624.

For a look at all of today’s economic events, check out our economic calendar.

The EU Summit Puts the Pound in Focus, with COVID-19 back in the Spotlight

Earlier in the Day:

It’s was a relatively busy start to the day on the economic calendar this morning. The Aussie Dollar was in action early on, with economic data from China also in focus.

For the Aussie Dollar

September employment figures were in focus this morning.

Total employment fell by 29.5k in September, partially reversing a 111k jump from August. Economists had forecast a 35k decline.

Full employment fell by 20.1k, following a 36.2k increase in August. In September, the unemployment rate rose from 6.8% to 6.9%. Economists had forecast an increase to 7.1%.

According to the ABS,

  • The number of unemployed people increased by 11,300 people and was up by 228,100 over the year.
  • Compared to September 2019, full-time employment declined by 301,700, with part-time employment falling by 56,700.
  • The employment to population ratio fell by 0.2 points 60.3%.
  • While the unemployment rate increased, the participation rate fell by 0.1 points to 64.8%.

The Aussie Dollar moved from $0.71375 to $0.71394 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.31% to $0.7140.

Out of China

The annual rate of inflation softened from 2.4% to 1.7% in September. Economists had forecast a softening to 1.8%. Month-on-month, consumer prices increased by 0.2%, following a 0.4% rise in August. Economists had forecast a 0.3% rise.

Wholesale deflationary pressures picked up in September. The producer price index fell by 2.1%, following a 2.0% decline in August, year-on-year. Economists had forecast a 1.8% fall.

The Aussie Dollar moved from $0.71440 to $0.71379 upon release of the figures.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.09% ¥105.26 against the U.S Dollar, with the Kiwi Dollar down by 0.03% to $0.6655.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Key stats include finalized September inflation figures from France.

Barring a material revision from prelim figures, we would expect the stats to have a muted impact on the EUR.

Expect Brexit updates from the EU Summit later in the day to be the key driver on the day.

On the monetary policy front, ECB President Lagarde is due to speak later in the day. Expect any chatter on monetary policy and the economic outlook to influence.

While Brexit will likely be the key driver, market concerns over the latest rise in new COVID-19 cases will also test the EUR.

At the time of writing, the EUR was up by 0.01% to $1.1747.

For the Pound

It’s a quiet day ahead on the economic calendar. There are no material stats due out, leaving the Pound in the hands of Brexit.

Failure to find common ground at the EU Summit later today could see British negotiators walk away. Expect a choppy day ahead…

At the time of writing, the Pound was up by 0.04% to $1.3017.

Across the Pond

It’s a busy day ahead for the U.S Dollar.

Key stats include Philly and NY State manufacturing PMI figures and the weekly jobless claims for the week ending 9th October.

Expect the weekly jobless claims and October’s Philly FED Manufacturing PMI to be the key drivers on the day.

Away from the economic calendar, U.S politics, and updates from Capitol Hill will also influence on the day.

The Dollar Spot Index was up by 0.02% to 93.400 at the time of writing.

For the Loonie

It’s a quiet day ahead, with no material stats to provide the Loonie with direction.

A lack of stats will leave the Loonie in the hands of the EIA crude oil inventory numbers due out later today.

Away from the economic calendar, market risk sentiment and COVID-19 news will also provide direction.

At the time of writing, the Loonie was down by 0.05% to C$1.3153 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Price Forecast – US Dollar Continue Slow Grind Lower

The US dollar initially tried to rally during the trading session on Wednesday in the early hours but gave back the gains in order to continue the longer-term downtrend. Ultimately, this is a market that looks likely to go looking towards the ¥105 level yet again. This is an area that has been important more than once, so it makes quite a bit of sense that we would continue to see noise in this area.

USD/JPY Video 15.10.20

That being said, the market has broken down below the level before, so I think it is only a matter of time before we reach below there again and go looking towards the ¥104 level, which of course was the recent lows. At this point, breaking down below there then opens up the possibility of a much lower level. At this point in time, the market will then go looking towards the ¥102 level, which was an extreme low at that point in time.

I have no interest in trying to buy this market, due to the fact that the Japanese bond market pays more of a return than the US one, and of course the currency markets pay close attention to that. With that being said, we continue to fade short-term rallies as they offer a bit of value when it comes to the Japanese yen. Ultimately, this is a market that I have no interest in buying due to the fact that the trend is so well ensconced, but I also recognize that the market is short-term focus more than anything else.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Fundamental Daily Forecast – Stock Market Sell-Off Likely to Favor Dollar/Yen

The Dollar/Yen is trading lower but inside Monday’s wide range for a second session as investors continue to gauge the risk in the markets. The current price action suggests a small tug of war is taking place as investors try to decide whether we’re in a “risk-on” or “risk off” market, and which currency is the most favored safe-haven asset.

At 05:08 GMT, the USD/JPY is at 105.436, down 0.042 or -0.04%.

After posting steep losses last Friday and on Monday, the USD/JPY settled down on Tuesday to post a small gain. The sell-offs were fueled by optimism over a U.S. fiscal stimulus bill after President Trump proposed a $1.8 billion package. However, traders returned to the U.S. Dollar on Tuesday as hopes faded that U.S Republicans and Democrats will reach a compromise on a second round of fiscal stimulus, which would deal a blow to the economic outlook.

On Wednesday, the Dollar/Yen was further supported as risk appetite weakened after Johnson & Johnson said on Tuesday it is pausing a clinical trial of a coronavirus vaccine and Eli Lilly and Co also said it paused a coronavirus antibody treatment.

China is Snapping up Japanese Government Bonds, and It’s Not Just for the Returns

China’s recent purchase of Japanese government bonds surged to the highest level in more than three years – as the country more than tripled its holdings between April and July this year, compared to the previous year, CNBC reported.

Yields on such bonds are near zero, making them an unlikely option as an investment. But analysts told CNBC there are other reasons why China would want to buy those bonds.

China can actually earn more on the investment by buying 30-year JGBs in Japanese Yen and swapping their currency exposure back into U.S. Dollars, according to Ross Hutchison, investment director of global fixed income at Aberdeen Standard Investments.

It (China) can pick up an additional 0.56% by doing so, according to Hutchison. Longer-term bonds typically have higher yields as investors need to take on higher risks for holding on to them for a longer period of time.

“Many reserve managers buy JGB’s and then swap or hedge the currency back into dollars, earning an additional ‘basis’ premium,” said David Nowakowski, a senior strategist of multi-asset and macro at Aviva Investors.

It’s also possible that China may be trying to manage the appreciation of the Yuan, as the Chinese currency spiked against the Japanese Yen in June, Hutchinson pointed out. Selling off the Yuan to buy JGBs, which are denominated in Yen, could help curb some of that appreciation.

Daily Forecast

Tuesday’s price action suggests that a steep sell-off in the stock market will likely send investors into the U.S. Dollar, driving the USD/JPY higher. While Friday and Monday’s price action suggests progress toward a stimulus bill will likely drive the U.S. Dollar lower, leading to a weaker USD/JPY.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Forex Technical Analysis – Weakens Under 105.389, Strengthens Over 105.527

The Dollar/Yen is trading lower early Wednesday as traders continue to hedge against stock market weakness and potential volatility tied to U.S. stimulus uncertainty and renewed concerns over the containment of the coronavirus after two companies paused their vaccine studies on Tuesday.

At 01:57 GMT, the USD/JPY is trading 105.340, down 0.138 or -0.13%.

Japanese Yen buyers are taking their cues from the U.S. stock market which lost ground on Tuesday, due to halted COVID-19 vaccine trials and an elusive U.S. stimulus agreement.

Both Johnson & Johnson and Eli Lilly & Co halted their coronavirus vaccine clinical trials and antibody trial, respectively, on safety concerns, while hopes for the passage of a new coronavirus relief package faded as U.S. House Speaker Nancy Pelosi rejected the $1.8 trillion coronavirus relief proposal from the White House, saying it “falls significantly short of what this pandemic and deep recession demand.”

Daily USD/JPY

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, but momentum is edging higher. A trade through 106.109 will change the main trend to up.

The minor trend is up. A trade through 104.944 will change the minor trend to down. This will shift momentum to the downside.

The short-term range is 107.049 to 104.002. Its retracement zone at 105.526 to 105.885 has been acting like resistance for nearly a month.

The minor range is 104.944 to 106.109. Its retracement zone at 105.527 to 105.389 is currently being tested. This is the last potential support before the 104.944 minor bottom and another minor 50% level at 104.903.

Daily Swing Chart Technical Forecast

The early price action on Wednesday suggests resistance at 105.527 and support at 105.389.

Bearish Scenario

A sustained move under 105.389 will indicate the presence of sellers. The first target is 105.242. Taking out this level could trigger a steep break into the minor bottom at 104.944 and the minor 50% level at 104.903.

Bullish Scenario

A sustained move over 105.389 will indicate that the selling pressure is slowing. Overtaking 105.527 will indicate the buying is getting stronger. This could trigger an acceleration to the upside with 105.885 the next potential upside target.

For a look at all of today’s economic events, check out our economic calendar.

Brexit and COVID-19 Keep the Pound in the Spotlight, with U.S Politics also in Focus

Earlier in the Day:

It’s was a relatively quiet start to the day on the economic calendar this morning. The Aussie Dollar was in action early on, with economic data from Japan due out later this morning.

For the Aussie Dollar

Consumer sentiment was in focus early on. The Westpac Consumer Sentiment Index jumped by 11.9% to 105.0 in October. In September, the Index had surged by 18.0% to 93.8.

According to the latest Westpac Report,

  • A 2nd sharp monthly rise took the index to its highest level since July 2018. Confidence now sits 10% above the average level in the 6-months prior to the pandemic.
  • The sharp increase was attributed to the October Federal Budget and continued success in containing the COVID-19 outbreak.
  • Expectations of a further RBA rate cut in November was also considered a possible source of support.

Looking at the sub-indexes:

  • Finances vs a year ago rose by 6.2% to 92.9, with finances next 12-months rising by 9.4% to 110.8.
  • Sentiment towards the economic outlook continued to impress.
    • Economic conditions next 12-months surged by 24.2% to 94.0, taking it above the long-run average of 90.7.
    • Over the next 5-years, sentiment jumped by 14.1% to 113.8. The long-run average sat at 91.3.
  • The time to buy a dwelling sub-index rose by 10.6%, with the Unemployment Expectations Index sliding by 14.2%.
  • Sentiment towards the housing sector also improved, with the House Price Expectations Index surging by 31.5%.

The Aussie Dollar moved from $0.71623 to $0.71644 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.04% to $0.7164.

For the Japanese Yen

Finalized industrial production figures for August are due out later this morning. Barring a marked revision from prelim numbers, however, the data should have a muted impact on the Yen.

At the time of writing, the Japanese Yen was up by 0.13% ¥105.34 against the U.S Dollar.

Elsewhere

At the time of writing, the Kiwi Dollar was up by 0.11% to $0.6658.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. Key stats include August’s industrial production figures for the Eurozone.

Finalized inflation figures for Spain are also due out but will likely have a muted impact on the EUR.

On the monetary policy front, ECB President Lagarde is scheduled to speak. Expect any chatter on monetary policy or the economic outlook to influence.

With Boris Johnson’s 15th October Brexit deadline, however, expect the focus to be on Brexit ahead of tomorrow’s EU Summit.

Adding to the EUR’s near-term woes is the continued rise in new COVID-19 cases.

At the time of writing, the EUR was down by 0.03% to $1.1743.

For the Pound

It’s a quiet day ahead on the economic calendar. There are no material stats due out, leaving the Pound in the hands of Brexit.

Its last chance saloon for the likes of Macron to compromise or face the uncertainty of a no-deal Brexit. Hopes of an EU compromise and an agreement had hit a wall over the weekend following Macron’s latest demands.

With the BoE ready to deliver negative rates and the UK government introducing new COVID-19 containment measures, only a Brexit deal can support a Pound rebound.

At the time of writing, the Pound was down by 0.05% to $1.2931.

Across the Pond

It’s a relatively busy day ahead for the U.S Dollar. September wholesale inflation figures are due out later today.

Barring particularly dire numbers, however, the stats are unlikely to have a material impact on the U.S Dollar.

The market focus will likely remain on geopolitics, Capitol Hill, the U.S Presidential Election, and COVID-19 updates.

The Dollar Spot Index was up by 0.01% to 93.539 at the time of writing.

For the Loonie

It’s a quiet day ahead, with no material stats to provide the Loonie with direction.

While there are no material stats, the IEA’s monthly report should provide crude oil prices along with the weekly inventory numbers.

Expect COVID-19 news to also influence sentiment towards the demand for crude oil and the direction of the Loonie.

At the time of writing, the Loonie was down by 0.08% to C$1.3150 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Price Forecast – US Dollar Bounces Against Japanese Yen

The US dollar has gone a bit higher against the Japanese yen during the trading session on Tuesday, as the market continues to see an attempted defense of the ¥105 level. This obviously is a large, round, psychologically significant figure and it does make a certain amount of sense that we would continue to see some volatility in this area. That being said, when you look at the longer-term trend you can clearly see that the 50 day EMA has been offering a bit of dynamic resistance, extending to the 200 day EMA. In other words, we are in a longer term downtrend and therefore need to respect that.

USD/JPY Video 14.10.20

On short-term rallies that show signs of exhaustion I am more than willing to jump in and fade this market, it simply seems to be one that is destined to grind much lower. The most recent low was lower than the one before it, and it now looks as though if we have made a lower high as well. In other words, everything looks right for sellers to continue to push this market lower.

With the idea of another fiscal package coming out the United States, it does make a certain amount of sense that this pair should continue to go lower. Furthermore, the Japanese bond market gives more of a return than the US bond market, something that I have never been able to say before. This of course drives more money into the yen, as the yen is needed to buy these bonds with all of that, it looks like we continue to you short-term charts to get short-term selling positions going.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Daily Forecast – U.S. Dollar Rebounds Against Japanese Yen

USD/JPY Video 13.10.20.

Japanese Yen Failed To Continue Its Upside Move

USD/JPY found support near 105.25 and rebounded closer to 105.50 as the U.S. dollar moved higher against a broad basket of currencies.

The U.S. Dollar Index continues its attempts to move above the resistance area at 93.20 – 93.25. In case the U.S. Dollar Index gets above this level, it will gain additional upside momentum which will provide support to USD/JPY.

Yesterday, Bank of Japan Governor Haruhiko Kuroda tried to assure the market that Japan’s central bank did not run out of policy measures to support the economy.

He stated that Bank of Japan was ready to take additional easing measures but also added that Japan’s inflation would stay negative for some time. In contrast, today’s U.S. Inflation Rate report is projected to indicate that inflation increased from 1.3% in August to 1.4% in September on a year-over-year basis.

In addition to his comments about inflation, Kuroda highlighted the positive yields on Japan’s long-term government bonds. While yields on 10-year bonds are near zero, longer-term bonds have positive yields, attracting investors and providing constant demand for Japanese yen.

Technical Analysis

usd jpy october 13 2020

USD/JPY received support above 105.20 and gained upside momentum. The nearest resistance level for USD/JPY is located at the 20 EMA at 105.55.

If USD/JPY manages to settle above this level, it will head towards the test of the major resistance at 105.70. Previously, the resistance at 105.70 was a major obstacle on the way up for USD/JPY. Most likely, USD/JPY will need additional upside catalysts to get above 105.70 if it gets to the test of this level.

In this scenario, USD/JPY will gain additional upside momentum and head towards the next resistance level at October highs at 106.10.

On the support side, USD/JPY may get some support at 105.40. A move below this level will open the way to the test of the next support level near 105.20.

If USD/JPY declines below 105.20, it will gain additional downside momentum and head towards the next support level near October lows at 104.90.

For a look at all of today’s economic events, check out our economic calendar.