Home Forex Japanese Yen May Rise With Covid Lockdowns Threatening Nikkei 225 Outlook

Japanese Yen May Rise With Covid Lockdowns Threatening Nikkei 225 Outlook

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Japanese Yen Basic Forecast: Bullish

  • Anti-risk Japanese Yen rose as US progress outlook deteriorated
  • Covid instances, lockdowns, fiscal woes might maintain USD/JPY decrease
  • Nikkei 225 could also be in danger, Thanksgiving liquidity drain forward

Japanese Yen, USD/JPY Recap

The Japanese Yen spent most of this previous week buying and selling increased towards its main counterparts, together with the US Dollar. USD/JPY aimed decrease as Treasury yields weakened, making authorities bonds in Japan comparatively extra engaging to traders. In reality, following some divergence forward of the US presidential election, USD/JPY now appears to be monitoring bond yield spreads between the US and Japan once more – see chart beneath.

The US yield curve flattened as longer-dated authorities bond returns declined, signaling fading confidence within the medium-term outlook. Buyers seem like specializing in the file tempo in native Covid-19 case progress somewhat than on optimistic vaccine information. Because the nation reached hospitalization highs, California imposed a late curfew for about 94% of its residents. Texas noticed 12,293 instances, beating a earlier file from the summer time.

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Week Forward

Going ahead, the anti-risk Japanese Yen seems to be in an optimum place. An absence of expediency in fiscal assist from the US poses a menace for each native and exterior equities. That is underscored if extra states take measures to impose lockdowns to assist include the unfold of the illness. The Worldwide Financial Fund (IMF) warned final week that the worldwide restoration seems to be shedding momentum.

In the meantime in Japan, instances have been additionally setting data. This brought on Tokyo to boost its Covid-19 alert standing to its highest degree. Whereas policymakers shunned imposing lockdowns, they urged residents to be extra cautious. The Nikkei 225, Japan’s benchmark inventory index, halted its spectacular successful streak from earlier this month after closing at its highest since 1991.

For updates on developments within the Japanese Yen and danger tendencies, make sure to follow me on Twitter @ddubrovskyFX

Finance Minister Taro Aso talked about that they ‘should stimulate sentiment with fiscal coverage’. His tone echoes what the Federal Reserve has been stressing within the US. FOMC minutes might proceed to reiterate this message with shopper sentiment additionally on faucet. The latter may disappoint given rising coronavirus instances. It would even be a shortened buying and selling week as a result of Thanksgiving vacation, opening the door to decrease ranges of liquidity.

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Japanese Yen May Rise With Covid Lockdowns Threatening Nikkei 225 Outlook

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— Written by Daniel Dubrovsky, Forex Analyst for DailyFX.com

To contact Daniel, use the feedback part beneath or @ddubrovskyFX on Twitter

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