USD/JPY Fundamental Daily Forecast – Should Tumble Further if WHO Declares Coronavirus Global Health Emergency

The World Health Organization (WHO) postponed a decision Wednesday over whether to declare the disease a global emergency. However, the WHO is expected to make the announcement today. This news should dictate the next move in the Dollar/Yen.
James Hyerczyk

The Dollar/Yen weakened on Thursday as investors grew more anxious about the spread of a virus in China. Fear and uncertainty over whether the virus is a local problem or a global emergency is encouraging investors to trim positions in risky assets and more their capital into the safe-have U.S. Treasury and the Japanese Yen.

At 11:34 GMT, the USD/JPY is trading 109.600, down 0.248 or -0.22%.

According to Reuters, death from the flu-like coronavirus stand at 17. Almost 600 people are infected and China has locked down Wuhan, a city of 11 million people, where the outbreak was believed to have originated at an animal market.

The moves up in the safe-have Japanese Yen and down in the Chinese Yuan were measured, suggesting investors were not yet panicking about the virus.

Hao Zhou, an economist at Commerzbank, said the worry was the virus would hurt China’s domestic demand.

“To cope with this risk, monetary policy could illustrate further easing bias. For the FX market, risk-off mode is likely to dominate for the time being,” he said.

Japan Reports Goods Trade Deficit for 2nd Straight Year in 2019

Japan logged a goods trade deficit in 2019, marking the second consecutive year a shortfall has been booked, the government said in a report on Thursday.

According to the Finance Ministry, the nation’s trade deficit in the recording period stood at 1.64 trillion yen (14.96 billion U.S. Dollars) with exports down 5.6 percent to 76.93 trillion yen (702.06 billion U.S. Dollars) compared to a 5 percent drop in imports to 78.57 trillion yen (717.10 billion U.S. Dollars).

On a regional basis, Japan booked a deficit with China, its largest trading partner, of 3.76 trillion yen (34.31 billion U.S. Dollars) in the recording period, with the amount growing for the first time in four years.

The ministry here said that demand for Japanese automobile components and semiconductor-linked equipment from China had declined in the recording period.

In its preliminary report, the ministry also said that with the United States, Japan booked a surplus of 6.63 trillion yen (60.50 billion U.S. Dollars), expanding from a year earlier, owing to solid demand for pharmaceutical products and circuit chip-making equipment.

As for Europe, a decline in demand for pharmaceutical products and vessels led to a deficit of 756.37 billion yen (6.90 billion U.S. Dollars) in the recording period.

For December alone, Japan’s goods trade deficit stood at 152.52 billion yen (1.39 billion U.S. Dollars), with exports dropping for the 13th straight month, down 6.3 percent, to stand at 6.58 trillion yen (60.04 billion U.S. Dollars).

Imports in the recording month, meanwhile, stood at 6.73 trillion yen (61.41 billion U.S. dollars), dropping 4.9 percent and marking the eighth successive month of decline, the data showed.

Daily Forecast

Investor sentiment has taken a hit this week, driving market participants out of higher-yielding assets and into the safe-haven Japanese Yen, as the mysterious coronavirus that has infected hundreds in China spreads.

The World Health Organization (WHO) postponed a decision Wednesday over whether to declare the disease a global emergency. However, the WHO is expected to make the announcement today. This news should dictate the next move in the Dollar/Yen.

Look for the USD/JPY to break further if the WHO declares a global emergency. If the WHO says it’s a regional matter then we could see a short-covering rally that drives the Dollar/Yen higher.

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