USD/JPY: End of trade deal to fuel the yen

Rising US COVID-19 cases and rising Sino-American tensions remain prominent for another week as USD/JPY is nearing decision time, Yohay Elam, an analyst at FXStreet, reports.

Key quotes

“Investors' focus remains on coronavirus statistics, kicking off in Florida and ending in California. If statistics begin flattening, markets may cheer, while an ongoing rise – especially in mortalities – may trigger a risk-off sentiment.” 

“Perhaps if the Senate begins clearly shifting toward the Democrats – allowing them to enact business-unfriendly policies – stocks may notice and the yen may rise.”

“The upcoming week features a sparser economic calendar. Housing figures and Markit's preliminary Purchasing Managers' Indexes are of interest but the focus will likely be on jobless claims. Any increase in claims would weigh on markets while a fresh drop would provide optimism.” 

“Will Washington and Beijing end the trade deal? That remains a remote option but as rhetoric and sanctions ramp up, the risk is growing. If either side hints that could happen, the yen would have room to rally.” 

“The yen is turned to conflicts such as around North Korea and Iran, both dormant for now. Nevertheless, a string of mysterious explosions in the Middle East may escalate. Tensions between the US and Iran dominated the news early in the year, before vanishing.”