- Summary:
- The USDJPY pair is in its sixth straight day in the red because of the new Japan prime minister and its role as a safe haven currency.
The USDJPY is down by 0.25% today, continuing a plunge that has been going on for the past five consecutive days. The pair is trading at 104.31, which is the lowest it has been since July 31st.
The USDJPY has been falling because of the latest leadership change in Japan and the overall weaker US dollar. As you recall, Japan’s ruling party voted for Yoshihide Suga as the prime minister. Suga was a long-term ally of Shinzo Abe and has decided to leave the cabinet largely unchanged. That means that he is likely to continue the Abenomics policies that include cultivating a close relationship with the United States and China.
The USD/JPY also reacted to the Bank of Japan’s decision last week. In it, the bank decided to leave interest rates unchanged and extend its asset purchases. But the bank also upgraded its forecast for the economy now that most companies have started to reopen. Recent data showed that the country’s exports have started to crawl back.
Meanwhile, the weaker dollar is also contributing to the decline of the USDJPY pair. The dollar index is down by more than 0.10% and is trading near the lowest level in the past seven days. As the US elections nears and as economic data disappoint, the greenback is likely to show some more weakness.
Finally, the number of coronavirus cases is rising around the world. And vaccine developers like Moderna have started warning that a vaccine could be delayed. Therefore, the USDJPY is falling because of its role as a haven currency.
Still, analysts at UOB, the Singapore-based bank see the pair rising in the near term. They wrote:
“However, downward momentum has been stronger than expected as USD dropped to a low of 104.25 last Friday. From here, USD could dip below 104.16 but oversold conditions suggest that a sustained decline below this level is unlikely (next support is at 103.80).”
USDJPY technical outlook
The USDJPY pair is trading at 104.31 and is in its sixth consecutive days in the red. The daily chart shows that the price is a few pips above the July 31st low of 104.11. The price is also below the descending purple trendline and the important resistance level of 104.20. At the same time, the RSI has moved to the oversold level of 30. This is not necessarily a bullish factor because it means that bears are still in control.
Therefore, I suspect that the pair will continue falling as bears attempt to move below the support at 104.00. On the flip side, a move above the resistance level at 105.20 will invalidate this trend.
USD/JPY technical chart
