Today, on October 15th, the US Dollar managed to gain 0,19% against the Japanese yen earlier on the trading day. This happened after Nikkei 225, Japan’s major stock index and one of the major Asian stock indices, gained 0,5% during the Asian trading session.
The Japanese stock market went down for 5 days in arrow but when suddenly started regaining the lost ground. This led to a stronger Dollar against the Japanese national currency. This rally followed yesterday’s strengthening seen in the US stock market over the course of the American trading session.
Still, experts say that the current strengthening of the American currency against its Japanese counterpart may be temporary since the 10-year US bond yield hit the 16-mnth low around 2,2% not so long ago.
The negative pressure exerted on the US Dollar by the low bond yield may back the consolidation of the currency pair around 107.00.
As for the Japanese index, the rally started by it came as a response to yesterday’s attempt of the US stock market to recover mid positive quarterly reports. However, the bearish sentiment is still dominating the market, thereby backing the retracement seen in stock markets.
Yesterday, at first Nasdaq gained 0,3%, while S&P500 increased by 0,2% on increasing trading volume. At the beginning of the trading session, Nasdaq gained 1,6% which followed by a downswing initiated by the bears . Dow Jones failed to retain the bullish tone and closed 0,4% lower on that day.
As for the continuation of the weakening of JPY against USD, Japan released revised industrial output figures, which turned out to be lower. The recent strengthening of the Japanese Yen took place amid concerns about inflation slowdown as well as the rate of the global economic growth. Investors are currently withdrawing funds from emerging markets and going back to Japanese and US markets. The US economy remains stronger than most other economies.
Meanwhile, concerns about another global economic slowdown are backing the sentiment that the Fed is going to delay the time of its first interest rate hike following the tapering of QE3. At the same time, the opposite direction of the monetary policies implemented by the BOJ and the Fed keep on pressing the Japanese Yen, thereby making it weaker against the US Dollar.
USDJPY: Prospects
According to the experts of Masterforex-V Academy, the H1 chart of USDJPY indicates that the long-term downtrend is still underway. After thing the local low at 106,65 yesterday, the move resumed earlier today. The price has already moved above the moving averages, which means the bullish scenario is more likely to manifest itself at this point.
If the price overcomes resistance close to 107,56, we may see a further rally up to 108,15, especially if backed by fundamentals.
Still, if the price breaks below the level of support at 107,03 when backed by fundamental, the next target to watch is 106,65.
