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Market Analysis – USDJPY

The US Dollar continues its bullish movement against the Japanese Yen this morning, climbing a further 30 pips during the Asian trading session. The asset is currently trading at 110.057, which is the highest exchange rate we have seen since the 24th March 2020. The asset is the only currency pair which the US Dollar has managed to form a 100% price correction based on the depreciation after the economic woes triggered by COVID-19.

Investors are awaiting the emergence of new drivers in the market but for now, they are assessing the prospects for further recovery of the global economy against the ambiguous statistics on the incidence of diseases in Europe, India, and South America. Despite an active vaccination campaign in Europe, many countries are reporting a record increase in new cases of coronavirus infection, which threatens new restrictive measures and the extension of quarantine.

Due to a lack of key economic statistics, investors are also focused on the new plan of US President Joe Biden to support the American economy. This time, it is planned to stimulate its growth by upgrading the infrastructure in the country. It is expected that tomorrow, the Head of State will provide the first part of the package, which will relate to the restoration and construction of roads and railways; the second part should be announced within a few weeks. It will contain the costs of healthcare reform. The total cost of the project is expected to be more than $3Trillion.

Japanese investors are focused on the publication of a summary of the opinions of the leaders of the Bank of Japan. Officials noted that shortly, the Japanese economy might move away from the downward trend, while the volume of exports and production would remain stable. Large-scale asset purchases such as ETFs are an effective means of supporting the economy during times of volatility. However, it has also been confirmed that risks of deflation, or prolonged price stagnation remained Japan’s main concern, despite spikes in inflation in some other economies. In general, these comments confirmed the confidence of investors that the regulator will not tighten monetary policy soon.

Japan also released some positive economic figures regarding the Japanese Economy. The country was predicted to release an unemployment rate of 3%, which is a rise of 0.1% from the month before, though the actual figure came in at 2.9%. Retail Sales was also released at a much higher figure. The market predicted the figure to be released at -2.7%, but was actually released at -1.5%, though it should be noted the deflated figure is still a concern for investors as explained above.

On Tuesday, investors are focused on a block of macroeconomic statistics from the United States on the level of consumer confidence and retail sales from Redbook for the week of March 26. Also, speeches by representatives of the US Federal Reserve, Randal Quarles and John Williams, are expected. With regards to Japan, the market will be closely monitoring the number of infections in the region as Japan has seen a spike in COVID-19 cases over the past thirty days.

Lastly, looking at the price movement of the asset we can clearly see that the asset is trading within a bullish trend. Over the last 24 hours the price action continues to look positive as the asset has not formed any major retracements or lower price swings. The main caution which traders are contemplating is whether the asset is overbought in the short to medium term. When overbought, the asset can of course form retracement, or even corrections. Looking at Fibonacci, if a retracement does form the price can drop to 110.000, hence why traders wish to avoid a retracement when attempting to trade the trend.

Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing investing advice or a recommendation, or an offer of or solicitation for any transactions in financial instruments or a guarantee or a prediction of future performance. Past performance is not a guarantee of or prediction of future performance.

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