USD/JPY holding in bullish territories in the face of overcooked USD

  • USD/JPY consolidating in what could be considered as overbought US dollar territory.
  • Eyes on US Treasures, congress, currency wars and the cases of COVID-19. 

USD/JPY is topping out in the 111 handle as the dollar loses steam and the pair falls into consolidation between 110.08 and 111.62. The US dollar has slowed in its advance following a series of intervention from the central banks seeking to free-up the USD liquidity and as the Federal Reserve moves to purchase unlimited quantities of Treasury bonds as well as mortgage-backed securities, direct purchases of corporate bonds, and direct loans to companies, loans which Congress now need to approve.  

Watching currency wars

Apart from all of this, markets are now weighing the possibility fo currency wars following President Donald Trump's comments that the strength of the dollar makes trade difficult. The question is whether the strength of the USD will trigger a round of concerted intervention. Indeed,  the BoJ will be keeping a close eye on the market and to continue to provide liquidity through various open market operations and asset buying. 

As for the yen, a switch in the FX playbook could see a flight to the yen considering COVID-19's spread and negative fallouts for the global economy. However, as analysts, a Rabobank pointed out, even if the number of coronavirus cases and related mortality rates peaks in Europe and the US over the next few weeks, "this is likely to see panic reducing and USD strength ebbing." "If the crisis is prolonged and the value of the USD continues to soar, however, concerted FX intervention to soften the dollar could be again on the menu."

We next await the Treasury market's reaction to the progress on the fiscal front as Congress continues to debate a $1.5-2tn "phase 3" rescue package. Democrats blocked the bill through the Senate arguing it focuses on the corporate sector and does little to help everyday people. While there has been no resolution to the stalemate situation, but it is expected to be resolved shortly which, combined with the latest move by the Fed to unlimited QE, should continue which on yields that have been heading lower this week (albeit, covering 6% today). 

USD/JPY levels


Today last price 111.39
Today Daily Change 0.16
Today Daily Change % 0.14
Today daily open 111.23
Daily SMA20 107.63
Daily SMA50 108.96
Daily SMA100 108.99
Daily SMA200 108.29
Previous Daily High 111.6
Previous Daily Low 109.67
Previous Weekly High 111.51
Previous Weekly Low 105.15
Previous Monthly High 112.23
Previous Monthly Low 107.51
Daily Fibonacci 38.2% 110.86
Daily Fibonacci 61.8% 110.4
Daily Pivot Point S1 110.07
Daily Pivot Point S2 108.91
Daily Pivot Point S3 108.14
Daily Pivot Point R1 112
Daily Pivot Point R2 112.76
Daily Pivot Point R3 113.92



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