Market Analysis – USDJPY
The US Dollar is showing a flat trading dynamic against the Japanese Yen in today’s trading in Asia, consolidating near the local lows since March 25, updated the day before. Traders are awaiting for further drivers in the market to witness more volatility and the formation of a trend. In addition to market drivers, traders are also waiting to see if the sentiment and volatility is likely to change as we enter deeper in the European session.
The positions of the US Dollar are gradually stabilising at the end of the week, which, in addition to the technical factors of correction, are facilitated by yesterday’s speech by the US Fed’s Chairman Jerome Powell. The head of the regulator hinted at a possible tightening of the monetary policy earlier than planned, but so far it is only a matter of reducing the volume of the quantitative easing program. Overall the Chairman of the regulator stood firm on his dovish policy while the economy continues its attempt at recovering to previous figures.
Partly, the pressure on the US Dollar is exerted by the inflation data published earlier this week. In March, the consumer price index rose from 1.7% to 2.6% and the core Consumer Price Index grew from 1.3% to 1.6%, which exceeded the expectations of experts. That inflation may continue to rise in the coming months, which would put pressure on the dollar since the US Federal Reserve still does not intend to tighten monetary policy until 2024.
The US Food and Drug Administration announced the creation of a committee to investigate the problems of blood clotting after vaccination with Johnson&Johnson. Mostlikely, based on the results of the proceedings, the department will make a final verdict on whether this vaccine will continue to be used in the United States. For the time being, the use of the vaccine has almost come to a complete halt until further notice.
The Japanese Yen, in turn, reacts cautiously to alarming statistics on the dynamics of morbidity in Japan. On April 14, the country’s authorities announced the identification of over 4,000 new cases of coronavirus infection, which is comparable to the growth rate at the beginning of the year when a state of emergency was introduced in a number of prefectures. Local medical associations are calling for a return to restrictive measures, as the situation is compounded by the approaching national holidays in late April and early May. A full economic lockdown or heavy economic restrictions can further strain the local currency further, which spent the most part of this year struggling to stabilise and find momentum.
Investors are also focused on comments from the head of the Bank of Japan, Haruhiko Kuroda. He noted that the economy remains in a difficult position, but their recovery continues; supported by increased global demand for Japanese goods, and increased business activity within the country. However, if the next wave of the pandemic cannot be stopped, the holding of the Olympic Games will be jeopardized. Their abolition could slow down economic growth again.
When looking at the currencies individually we can see the US Dollar Index continues to decline now for the fourth consecutive day, renewing monthly price lows. In turn, the Japanese Yen is seeing mixed price movements when looking both at the Yen’s currency index, and individual currency pairs.
Resistance levels: 109.00, 109.37, 109.84, 110.23.
Support levels: 108.61, 108.15, 107.78, 107.42.