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USD/JPY Fundamental Daily Forecast – Don’t Be Fooled by Early Strength, There’s Still Risk Out There

By:
James Hyerczyk
Published: Jan 31, 2020, 09:52 UTC

The direction of the USD/JPY is going to continue to be determined by the direction of U.S. Treasury yields and appetite for risky assets.

USD/JPY

The Dollar/Yen is trading mixed on Friday as the Forex pair tried to regain its footing amid the hopes China could contain the coronavirus, even as headlines spoke of more cases, mounting deaths, flight suspensions and production slowdowns at factories.

Some of the early strength is being fueled by the World Health Organization’s (WHO) confidence in China’s response to a rapidly-spreading virus that tempered worries over a jump in infections despite declaring the situation a “global emergency” on Thursday.

At 09:37 GMT, the USD/JPY is trading 108.949, down 0.011 or -0.01%.

The WHO said late Thursday that the coronavirus outbreak was a global emergency, but opposed travel restrictions and said China’s actions so far will “reverse the tide” of its spread.

Despite an increase in deaths and new cases, the WHO’s assured tone was enough to pause a rush to safety that has for two weeks pounded stocks and hammered currencies and commodities exposed to China.

The direction of the USD/JPY is going to continue to be determined by the direction of U.S. Treasury yields and appetite for risky assets. Make no mistake about it, even with the WHO showing confidence in China’s ability to contain the virus, cases are still showing up around the world, and investors are still treating the Japanese Yen as a safe-haven currency.

Japanese Economic News

Japan’s factory output fell at the fastest pace on record in October-December amid sluggish demand at home and abroad, reinforcing views the economy likely contracted in the fourth quarter.

Factory output fell 4.0% in Q4, the fastest pace of decline since comparable data began in 2013, data from the Ministry of Economy, Trade and Industry showed on Friday.

Separate data showed retail sales fell for a third straight month in December, adding to worries about consumer spending after a sales tax increase in October.

Retail Sales – a key gauge of private consumption – fell 2.6% in December from a year earlier, down for a third straight month and compared with a 1.8% decline expected by economists.

Core consumer prices in Tokyo rose 0.7 percent in January from a year earlier, government data showed on Friday.

The core consumer price index for Japan’s capital, which includes oil products but excludes fresh food prices, compared with economists’ median estimate for a 0.8 percent annual rise.

Japan’s unemployment rate in December was unchanged from the previous month at 2.2 percent, reflecting a labor shortage due to the country’s rapidly aging population, government data showed Friday.

The number of unemployed was 1.45 million in the reporting month, down 140,000 from a year earlier, according to the Ministry of Internal Affairs and Communications.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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