Daily Market Recap - USDJPY

The USDJPY rose almost a percent at the start of the week after a statement from the Bank of Japan (BoJ) voiced concerns over a potential economic contraction. The central bank pledged to act decisively to stave off another great depression.

The increased likelihood of further aggressive monetary stimulus by the BoJ has weighed on the Japanese Yen. Further compounding the troubles for the Yen are the rallying Asian equity markets which put into question the utility of hanging onto the safe-haven currency for now.

The US Dollar Index (DXY) climbed roughly by the same amount as the USDJPY, notching in an increase of 1.10 percent at the time of writing. Stronger demand in the USD from the risk-on sentiment shared by traders was likely the main driver of the movement seen today.

Glancing over fixed income securities, the yield of the 10 year US treasury bills rose in correlation to the USDJPY, further supporting the gains in the pair. Wall Street equities continue to rise albeit at a modest pace.

From a technical perspective, the USDJPYs next upside target would be to clear above the 108 level. This feat does seem difficult in the short term however, as the momentum does seem geared to the downside for now. The strong rise in the pair seen today may trigger a correction lower towards the 0.236 Fibonacci retracement level at 107.287.

(Chart Source: Tradingview 11.05.2020)

Looking ahead this week in Japanese economic news, the Leading Economic Index will be released tomorrow, as well as the coincident index for March. Traders will be looking for signs of any unexpected deterioration in the Japanese economy.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.