JAPANESE YEN TECHNICAL FORECAST – BULLISH
- Anti-risk Japanese Yen climbed as USA growth outlook deteriorates
- Nikkei 225 might be at more risk, thanksgiving liquidity drains ahead
- Coronavirus cases, fiscal woes, and lockdown measures might keep the USD/JPY low
JAPANESE YEN & USD/JPY SUMMARY
The Japanese Yen spent most of its time last week trading higher against other major peers including the USD. The USD/JPY aimed much lower with the weakened Treasury yields, making the Japanese government bonds relatively more appealing to traders. Technically, after some divergence before the US 2020 election, the USD/JPY seems to track the bond yields spread between japan and the US Again as shown on the chart below.
The US yield curve becomes flat as the long-dated government bond returns dropped, signaling the fading confidence in the mid-term outlook. The traders seem to focus on a record pace in domestic coronavirus case growth instead of positive vaccine news. With the US reached hospitalization peaks, California has imposed a later curfew for at least 94% of Californians. Texas saw about 12,293, further beating the previous record highs from summer as Saudi Aramco Employs Financial Institutions for a Multi-Tranche Bond Deal.
A look ahead, the anti-risk JPY seems to be in the optimal position. The lack of expediency in fiscal support from the United States poses a threat for both external and local equities. Moreover, this is underpinned incase more stakes take additional measures to impose more lockdowns to assist contain further spread of covid-19. The IMF (International Monetary Fund) warned late last week that the global economic recovery seems to have lost momentum.
At the moment, cases are increasing rapidly. This made Tokyo raise their coronavirus alert status to a new peak. On the other hand, lawmakers have refrained from imposing more restrictions, urging residents to become more cautious. Also, the Nikkei 225 benchmark stock index, hampered the impressive winning streak from early this month after closing at the highest levels since 1991.
Taro Aso, the Japanese Finance Minister stated that they should stimulate sentiment with legitimate fiscal policy. The Tone of the finance minister reflected what the Fed has stressed in the United States. The FOMC minutes might continue to focus on the message with consumer sentiment also on the cards. The FOMC might disappoint considering the increasing covid-19 cases. Also, the week ahead will be a shorter trading week mainly because of the Thanksgiving holiday. This opens doors for lower liquidity levels.
Government Bond & USD/JPY Spread Relationship