Japan has had negative interest rates for four years. The overnight call rate set by the Bank of Japan was cut from 0.1% to -0.1% in February 2016. It has not moved since. Japan has had ultra-low rates for more than two decades. The BoJ reduced the overnight call rate to 0.5% in September 1995. It has not been above that level in the subsequent 24 years. If there were one place for 21st-century central bankers to look for the economic efficacy of very low-interest rates it should be Japan. But Japan is rarely mentioned in polite economic society.
USD/JPY rises above 110.00, potential head-and-shoulders on 1H
Risk reset in stocks is boding well for USD/JPY. The pair may be forming a head-and-shoulders pattern on the hourly chart. The bulls are not out of the woods yet and a break above 110.12 is needed to invalidate lower highs setup on the hourly chart.
Latest USDJPY News
The 100-day moving average has crossed above the 200-day MA, confirming a bullish crossover, the first since August 2018.
So far, however, that has failed to inspire yen sellers. The USD/JPY pair is currently sidelined around 109.90, having faced rejection at 109.97 a few minutes ago.
The long-term bull cross is a lagging indicator and often ends up trapping the bulls on the wrong side of the market.
The futures on the S&P 500 are currently reporting a 0.20% gain, signaling a potential risk reset in the markets.
If the equities continue to rise, the USD/JPY pair could retake the 110.00 handle.
The spot fell from 110.22 to 109.76 on Tuesday as global equity markets fell on coronavirus scare
The US stocks tracked its Asian and European equities lower on Tuesday with the S&P 500 losing 8 points or 0.27%, courtesy of coronavirus scare, sending the anti-risk yen higher.
THEMES AFFECTING THE USD/JPY
SPECIAL USDJPY YEARLY FORECAST
“Bye bye bye” – N-Sync’s greatest hit from the 1990s can be used to say farewell’s the 21st century’s second decade. The global economy is in-sync once again – but political uncertainty remains elevated and will likely be enhanced in 2020. 2019 was dominated by trade talks as the primary driver for the safe-haven Japanese yen while the Federal Reserve’s shift from raising rates to cutting them weighed on the US dollar. Nevertheless, brighter prospects for the US economy – despite external headwinds – kept the currency pair in check.