USD/JPY Fundamental Daily Forecast – Trump’s Positive COVID-19 Test Heightens Existing Political Uncertainty

The Dollar/Yen is down sharply on Friday as a plunge in global equity markets and commodities sent investors scurrying for protection in the safe-have Japanese Yen. The catalyst for the move is the news that President Trump had contracted COVID-19. The news triggered a volatile move in the financial markets and thrust COVID-19 back into the spotlight for investors.

At 08:15 GMT, the USD/JPY is trading 105.185, down 0.376 or -0.36%.

The White House announcement is expected to heighten existing political uncertainty around the U.S. election on November 3, another major risk event for markets. Jeff Henriksen, co-founder and CEO of Thorpe Abbotts Capital called the president’s positive test a “game changer” for market behavior in the short term.

House passes $2.2 Trillion Democratic Coronavirus Stimulus Bill

The House passed a $2.2 trillion Democratic coronavirus stimulus plan on Thursday night even as Democrats and the Trump administration struggle to strike a relief deal.

The bill likely will not get through the Republican-held Senate and become law. Senate Majority Leader Mitch McConnell has opposed the legislation as his caucus resists spending trillions more on the federal response to the pandemic.

Japan’s Jobs Market Worsens in August as Coronavirus Damage Persists

Japan’s unemployment rate rose in August to its highest in over three years and job availability fell to a more than six-year low, government data showed on Friday, indicating damage caused by the COVID-19 pandemic persisted through the month, Reuters reported.

Japan’s seasonally adjusted jobless rate rose to 3.0% in August, the highest since May 2017, labor ministry data showed. The result met analysts’ median forecast of 3.0%.

The data showed about 2.06 million people lost their jobs in August, 490,000 more than in the same month a year earlier, and marking the seventh consecutive month of increase.

Compared with the previous month, however, the number of employed workers rose by 110,000 people in seasonally adjusted terms – the fourth straight month of gain.

The jobs-to-applicants ratio fell to 1.04, matching a level last seen in January 2014. It compared with 1.08 in July, and a median forecast of 1.05.

Daily Forecast

Overnight, investors responded to the President’s positive COVID-19 test as expected. They sold risky assets and bought the traditional safe-havens – bonds, the dollar and the Japanese Yen.

Traders will also monitor nonfarm payrolls and unemployment figures due at 12:30 GMT. There will also be consumer sentiment and factory orders released at 14:00 GMT.

The direction of the USD/JPY over the short-run will be determined by how the U.S. stock market responds to the Trump’s COVID-19 news.

Trump’s diagnosis could force investors to focus on the coronavirus pandemic once again and dampen hopes of an economy recovery while raising fears of a “second wave”. It all actually comes down to whether the buying of growth-oriented companies can offset the losses expected in companies that need a recovery to do well.