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Rising tensions in emerging markets, dropping US yields – and USD/JPY above 110?

March 29, 2019 10:00

Economic events calendar

Source: Economic Events 29 March 2019 - Admiral Markets' Forex Calendar

The USD/JPY has arrived in a very interesting situation for the coming days. Even though 10-year US Treasury yields dropped to new yearly lows and the lowest levels since mid-2017, the USD/JPY could stabilise above 110.

It has been a surprise to see the Yen struggle. The combination of the rising tensions in Turkey (where Turkish Lira swaps - the cost of borrowing the currency overnight - pushed to a never before seen level on Tuesday at 1,338%, principally due to Turkish banks avoidance of offering foreign speculators liquidity to bet against the Turkish Lira), and the resulting risk of a spill-over effect on other emerging countries, should make for a rise in value, particularly against the USD.

After yesterday's final GDP data printed at an annualized 2.2% on quarter in Q4, well below a 2.6% growth in the previous estimate, and the USD/JPY pushing upwards instead of down, the outlook for the currency pair into the week's close can be considered bullish.

If bulls can reconquer 110.80/111.00, another test of the region around the current yearly-highs around 112.00 in the upcoming week seems likely.

Only a drop below 109.70 in USD/JPY could quickly result in further losses, and a dynamic push with a first target around 108.50:

USD/JPY 4 hour chart

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY 4-hour-chart (between January 11, 2019, to March 28, 2019). Accessed: March 28, 2019, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of USD/JPY increased by 13.7%, in 2015, it increased by 0.5%, in 2016, it fell by 2.8%, in 2017, it fell by 3.6%, in 2018, it fell by 2.7%, meaning that after five years, it was up by 4.1%.

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