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Will US yields stabilise and help the USD/JPY close above 110.00?

February 28, 2020 11:00


Admiral Markets' Forex Calendar

Source: Economic Events February 28, 2020 - Admiral Markets' Forex Calendar

After the USD/JPY went for a test of the region around 2019's yearly highs of 112.00/30, recent developments concerning the Coronavirus resulted in a sharp bounce from the massive risk-off hitting global financial markets.

While we expect volatility to stay elevated since the worst is probably yet come (the US CDC said that it wants to prepare the American public for the possibility that their lives will be disrupted in the US with the Coronavirus' spread), a short-term push back above 110.00 could be coming.

Our take: if the Personal Spending data comes in better than expected, and above 0.3%, 10-year US yields (which just saw new all-time lows recently), could see a bounce, thus driving the USD/JPY higher.

But we are very cautious in regards to the sustainability of such a move: if the situation around the Coronavirus worsens again, and signs intensify that the Fed may be forced to go with a surprising "emergency rate cut" before their next meeting on March 18 (which is currently not in sight thus "surprising"), US yields could see another push lower, driving the USD/JPY sustainably back below 110.00.

Technically the mode stays bullish as long as we trade above 107.80/108.00:

Daily Chart

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between December 18, 2018, to February 27, 2020). Accessed: February 27, 2020, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of the USD/JPY increased by 0.5%, in 2016, it fell by 2.8%, in 2017, it fell by 3.6%, in 2018, it fell by 2.7%, in 2019, it fell by 0.85%, meaning that after five years, it was down by 9.2%.

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