USD/JPY Fundamental Daily Forecast – Shift in Investor Sentiment Making Yen Attractive Alternative

Safe-haven buyers are helping to prop up the Japanese Yen on Tuesday in response to weaker global equity markets and renewed selling in the crude oil market. Some investors may be reacting to reports that North Korean leader Kim Jong Un is gravely ill after cardiovascular surgery last week, but so far the story has been denied by the rogue nation as well as South Korea and China.

At 08:59 GMT, the USD/JPY is trading 107.350, down 0.290 or -0.27%.

Historic Plunge in US Crude Weighs on Asian Shares

Southeast Asian stock markets were pummeled on Tuesday, after a historic plunge in U.S. crude futures to below zero highlighted the damage wreaked by the coronavirus pandemic.

“The impact of negative oil means different things for different Asian economies – but if you have to generalize, it isn’t great news,” Robert Carnell, regional head of research, Asia-Pacific at ING, wrote in a note.

Such a big negative deviation from the optimal price of oil will likely weigh heavily on demand for Asia’s exports, he added.

US Stock Futures Point Lower in Early Trade

In another sign that investors are shedding positions in riskier assets for the safety of the Japanese Yen, U.S. stock futures are posting losses in early morning trading Tuesday. Like their Asian counterparts, U.S. stocks are being pressured by lower oil prices.

Furthermore, shares of IBM are down nearly 3.08% after the company reported a 3.4% decline in revenue in the first quarter from a year ago amid the spread of coronavirus. IBM is helping to contribute to the implied opening drop in the Dow Jones Industrial Average of about 250 points.

Daily Forecast

Later today at 14:00 GMT, traders will get the opportunity to react to the latest news on U.S. Existing Home Sales. The report is expected to show 5.27 million units were sold, down from 5.77 million units the previous month.

The wildcards today will be the story about North Korean leader Kim Jong Un, tanking oil prices and the great debate over reopening the U.S. economy.

Early Tuesday, confusion remained over the state of Kim’s health.

“We confirm that Chairman Kim Jong Un is currently touring provincial areas with his close aides and we do not detect evidences to support speculation about his ill health,” South Korea’s presidential office told NBC News. “Even North Korea’s Worker Party, military or cabinet are showing any special movements such as emergency decree. We believe that Chairman Kim is active as normal as he has been.”

Reuters also reported, citing two government sources, that Kim was not gravely ill.

Stock market volatility is expected to remain intense with traders sensitive to the tone of the headlines, which can trigger dramatic shifts in investor sentiment throughout the day. Last week, the global equity markets rallied on the hope that the worst of the pandemic is behind us, but this optimism seems to be facing headwinds this week, which is making the Japanese Yen an attractive safe-haven currency.