- The Japanese yen strengthens despite appetite for risk.
- A weaker US dollar sends USD / JPY lower.
- Joe Biden becomes President of the United States and delivers his inaugural address.
He USD/JPY has broken below 103.60 and has fallen to 103.43, reaching the lowest level in almost two weeks, due to the fall of the US dollar. The pair then modestly recovered, climbing back above 103.50.
The Japanese yen has gained momentum across the board despite Wall Street indices trading at all-time highs and US yields remain in recent ranges. In United States, Joe Biden is sworn in as President. He is delivering his inaugural address. He is expected to sign his first executive orders later today, undoing some Trump policies.
The US dollar has failed to sustain gains. The DXY Dollar Index rose to 90.65 and then fell back to 90.42, trading modestly lower for the day. The key driver in the DXY index has been the decline in the EUR / USD.
On Thursday, the Bank of Japan will announce its decision on monetary policy. The central bank is expected to keep rates at -0.1%. The focus will be on controlling the yield curve, which aims to maintain the 10-year JGB yield target around 0.00%. “Last month, the Bank of Japan released another monetary policy review, the results of which are expected in March. Speculation about the changes this could bring has increased. One shock is that this week’s regular policy meeting is unlikely to bring any new monetary policy changes, ”Rabobank analysts mentioned.
USD / JPY short-term outlook
USD / JPY tested levels below key support at 103.50 / 55, a horizontal level and where the 20-day SMA is located. A daily close below this region would suggest additional weakness ahead of the US Dollar, exposing the round 103.00 level.
The bias in the short term points to the downside, but if it recovers 103.60 it would return to the recent range.
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