USD/JPY stable around 110.00 – a re-test of the yearly highs by the weekly close?

March 27, 2020 10:30

Source: Economic Events March 27, 2020 - Admiral Markets' Forex Calendar

While volatility in forex markets and US yields remained elevated over the last few days, USD/JPY traders still favoured the upside with the currency pair recapturing, at least for a short while, 111.00.

This is an interesting development, given the next massive monetary stimulus from the Fed coming, and the announcement to buy an unlimited amount of US Treasuries and Mortgage-Backed-Securities (MBS) last Monday, and while 10-year US-Treasury yields dropped back below 1.00%.

In fact, this development does not necessarily indicate that market participants are becoming more and more optimistic, the bias might switch back to "risk-on" again.

Current developments in the USD/JPY underline even more our short-term cautiousness towards USD short engagements since markets still have a USD shortage, and thus the usage of the re-installed swap lines of the Fed from the BoJ could result in an ongoing squeeze higher and either a test or even a break of the region around 112.00/30.

In addition to that, for the weekly close, the upcoming US economic projection in regards to Personal Spending is of high interest, as well. If the data does not come in as bad as markets may anticipate due to the Corona-shutdown, US yields could gain bullish short-term momentum and push the USD/JPY already towards its current yearly highs around 112.30:

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between February 1, 2019, to March 26, 2020). Accessed: March 26, 2020, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of the USD/JPY 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%, in 2019, it fell by 0.85%, meaning that after five years, it was down by 9.2%.

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