JPY : Possibility of Rising

(Mon, 26 Oct 2020).

USD/JPY MAY BENEFIT FROM RISKY ASSET SELL-OFF

After Thursday’s sharp decline, USD/JPY ended off the week lower but has already made an attempt to claw back some of those losses. The US dollar index traded slightly higher during the first half of the London session as investors exercise caution amidst continued increases in coronavirus and anticipated restrictions. Equity markets have witnessed a modest sell-off which can bode well for USD/JPY as investors may view it as a safe haven.

CHALLENGES TO AN EXTENDED USD/JPY BULLISH MOVE

The weekly chart shows a long and steady decline in price since the beginning of April, as shown by the descending trendline with 105.00 presenting a key psychological level.

The daily chart once more shows the 105.00 level which is the first level of support that needs to be overcome if the recent bullish momentum is to continue. A close above 105.00 would bring 105.35 into focus before a potential test of the descending trendline.

Failure to close above 105.00 may see another move down to the recent swing low at around 104.34 before potentially testing the 3-month low at 104.00

RISK EVENTS FOR THE WEEK AHEAD

The US announce Q3 GDP data and provide an update on continuous jobless claims while the Bank of Japan have an interest rate announcement where it is widely expected that rates will remain unchanged. US GDP is expected to see a significant increase after Q2’s disappointing -31.4% figure (annualized).

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