Overcoming any boundaries is important for traders, although often these digital thresholds are of purely psychological significance. Nevertheless, the market is subject to emotions and emotional decisions, therefore, a kind of "numismatics" complements the fundamental picture for a particular pair.
Take, for example, the behavior of the Japanese currency. Today, the USD/JPY pair has already reached the 105th figure, updating 5-month highs. The growth of the yen is due only to panic in the market, which in turn is due to anti-records. The statistics are really sad: in China, the number of coronavirus victims exceeded the three thousandth mark, and over 2200 people were infected in the world in a day COVID-19. In addition to China, coronavirus spread to 85 countries, while the total number of infections reached 98 thousand. Such dynamics continue to scare investors, and this fact is eloquently reflected in the markets - and not only in the currency market.
In particular, the profitability of 10-year-old treasuries also surpassed a psychologically important mark - this indicator not only dropped to a one percent level, but also plunged at 0.9% today (the yield has currently reached 0.811%). The dollar index also slumped, unable to hold on to the 97th figure. The weakness of the US currency manifests itself in different ways in dollar pairs, but most clearly in pair with the yen. The Japanese currency is used by the market as a defensive asset, acting as a fear index. And judging by the impulsive dynamics of the USD/JPY pair, fear really has big eyes - the pair collapsed by almost 600 points in two weeks.
In turn, the dollar is under pressure from various fundamental factors. Firstly, the fact that the interest rate was immediately reduced by 50 basis points puts background pressure on the greenback. Moreover, the Fed representatives do not exclude further steps in this direction. For example, James Bullard, who spoke this week, said that the rate cut at the March meeting "may not be needed." This wording guarded investors, because after an unscheduled rate cut, the dollar regained its position precisely on the belief that the Federal Reserve would limit itself to the measures taken. However, yesterday the head of the Dallas Federal Reserve Bank Robert Kaplan, who, as a rule, takes a hawkish position, also sowed a seed of doubt - according to him, "it's too early to talk about the decision of the Federal Reserve in March." At the same time, he specified that the regulator will monitor the growth in the number of infected people, and this factor will be taken into account when deciding on a meeting in March.
Such remarks only increased pressure on the dollar, as the number of infected people is growing every day, including in the United States. Almost 200 cases have been confirmed throughout the country, the number of deaths has reached 12 people. To date, new infections have been recorded in several states at once. In particular, in Massachusetts and Maryland, coronavirus was confirmed in three patients. The first patient, Covid-19, was recorded in Tennessee, and a visitor to one of Colorado's medical facilities was checked for infection. California and Washington state already have a state of emergency. Obviously, the situation will worsen every day until it reaches a critical point. Therefore, the probability of interest rate cuts at the March meeting will also grow every day.
The situation is no better in Japan: the number of people infected with the new coronavirus there has reached 1055, however, most of them are passengers and crew of the Diamond Princess cruise ship. Covid-19 is a common global problem, only currencies react differently to the current situation. The yen is the undisputed beneficiary of panic moods today.
Given the dynamics of COVID-19 distribution, we can assume that the USD/JPY pair will continue to show downward dynamics - at least, the fundamental background contributes to this.
From a technical point of view, the situation is as follows. On all the higher timeframes (except for the monthly chart), the pair is on the lower line of the Bollinger Bands indicator under all the lines of the Ichimoku indicator, which generated a strong bearish Parade of Lines signal. This indicates a clear advantage of the downward movement. The bearish momentum is so strong that it is too early to talk about a price correction: only if the data on the growth of the US labor market today are much better than expected, the bulls of the pair can expect a temporary price pullback. Otherwise, priority will remain downwards. The main target of the downward movement is located on the lower line of the Bollinger Bands indicator on the monthly chart, that is, at around 105.00.
The material has been provided by InstaForex Company - www.instaforex.com