Corona Virus
Stay Safe, FollowGuidance
Fetching Location Data…
James Hyerczyk

The Dollar/Yen is inching higher on Thursday after selling off the previous session as investors continue to juggle the two safe-haven assets. Yesterday’s weakness may have been part of overall weakness in the U.S. Dollar as other currencies also gained against the greenback.

Some days the dollar rallies against the Japanese Yen when stocks break and other days the move is reversed. On Wednesday, a high ranking government official just about killed any chance of a pre-election stimulus package. Last week, this news would’ve sent the U.S. Dollar higher, but yesterday, investors favored the Japanese Yen for protection.

At 06:45 GMT, the USD/JPY is trading 105.311, up 0.159 or +0.15%.

World Stocks Weaken on Pandemic Surge, Yen Gains on Safety Bid

Global stock markets mostly retreated on Wednesday as a record number of new coronavirus infections in parts of Europe led investors to shift away from risky assets to traditional safe havens such as the Japanese Yen.

Concerns that a resurgence in the COVID-19 pandemic could lead governments to again shut down economies spurred profit-taking, particularly after the recent stock market rally.

Pandemic uncertainties were compounded by news on Tuesday of halts to separate trials for a COVID-19 vaccine and a treatment, tempering a brief stock boost from U.S. investment bank Goldman Sachs Group’s strong earnings report, Reuters reported.

Remarks on Wednesday by U.S. Treasury Secretary Steven Mnuchin that a deal for more fiscal stimulus would not likely be reached before the November 3 elections also capped gains in shares.

“At this point getting something done before the election and executing on that would be difficult, just given where we are and the level of detail, but we’re going to try to continue to work through these issues,” Mnuchin said at  conference sponsored by the Milken Institute.


Next Dollar/Yen Move May Be Determined by Direction of Yields

On Wednesday, government bonds also benefited from investor caution. German bund yields, which move inversely to prices, hit their lowest since May. The 10-year U.S. Treasury yield dipped to 0.7256%, and the yield curve – the gap between two – and 10-year yields – flattened a touch on news that more U.S. fiscal stimulus was unlikely before the November 3 election.

When U.S. rates were well above Japanese yields, a drop in U.S. Government bond yields had a more significant influence on the USD/JPY. However, with U.S. yields so low, the affect isn’t that great on the Forex pair. Nonetheless, a possible inversion of the U.S. yield curve would be a significant event that could drive the USD/JPY sharply lower. It’s certainly something that has to be monitored.

Daily Forecast

Our work suggests the bias is to the downside for the USD/JPY, but we may have to put up with a few days of choppy trading because of technical support levels. However, crossing to the weak side of 105.056 then the recent bottom at 104.944 will indicate the selling is getting stronger. Our trigger point for an acceleration to the downside is 104.807. We’ll get a little nervous about the short side if buyers overcome 105.624.

For a look at all of today’s economic events, check out our economic calendar.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Trade With A Regulated Broker

  • Your capital is at risk
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.