Coronavirus and a dovish Fed – USD/JPY with a weak weekly close?
Source: Economic Events January 31, 2020 - Admiral Markets' Forex Calendar
The Fed rate decision on Wednesday this week couldn't brighten the picture for the USD/JPY after its recent significant drop back below 110.00.
While nothing new came last Wednesday, paired with the rising expectations among market participants of a dovish Fed in the future who expect, with a likelihood of over 80%, rate cuts at least once by 25 basis points, this should keep the pressure on US yields and thus fuel our expectation of USD/JPY seeing a further drop, finding a potential first target around 107.80/108.00.
That said, any disappointment in today's data around the Personal Income and Personal Spending, resulting pressure on US yields could thus result in a bearish weekly close in the currency pair with the main focus lying on the region around 107.80/108.00.
In addition to that, USD/JPY traders should keep a close eye on any new developments on the Coronavirus which result in another wave of short-term risk-off hitting financial markets, driving US yields lower and thus USD/JPY lower, too.
Technically the region around 107.80/108.00 is activated if we get to see a drop below 108.50 while above the mode stay choppy with a neutral tendency, leaving chances of a near-term test of the region around 110.30 on the table:
Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between November 20, 2018, to January 30, 2020). Accessed: January 30, 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 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%.
Discover the world's #1 multi-asset platform
Admiral Markets offers professional traders the ability to trade with a custom, upgraded version of MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5 Supreme Edition!
Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
- Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
- To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
- Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
- The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
- Any kind of previous or modeled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
- Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.