USD/JPY traders with a sharp focus on US yields for the weekly close

March 13, 2020 10:00

Source: Economic Events March 13, 2020 - Admiral Markets' Forex Calendar

Given the massive volatility in US yields, and knowing the high positive correlation between US yields and the USD/JPY, high volatility in the currency pair over the last few days does not come as a big surprise.

In fact, we expect volatility to stay very high, especially if we get to see sharper moves in US yields, potentially driven by surprising US economic data sets.

According to the Fed Watch Tool, market participants expect the Fed to cut rates by another 75 basis points by next Wednesday, and the impact of today's Michigan Consumer Sentiment seems limited on US yields and thus also the USD/JPY.

But a print below 95 points could add further fuel to current US recession fears, push US yields lower, and drive the USD/JPY lower, too.

On the other hand, forex traders should keep an close eye on the BoJ and any comments which may make it over the news ticker: any verbal intervention from the BoJ e.g. openly expressing concerns over instability in Japanese financial sector and economy, warning between the lines that an intervention from the BoJ might be on its way, could see a sharper push higher in the USD/JPY above 105.00 and probably as high as 106.50.

Still and overall, we remain bearish towards the currency pair, and see with a next wave of risk off hitting the markets and a push lower in US yields, at least a re-test of the recent lows around 101.50 as a serious option:

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between 03 January 2019 to 12 March 2020). Accessed: 12 March 2020 at 10:00 PM 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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