The USDJPY currency pair dropped throughout the early European session this Friday (7/17). The pair must be willing to re-register lower levels after the US Dollar weakens. But a deeper decline awaits a break of the 107.00 exchange rate.
The US dollar is struggling to capitalize on the upward momentum built since the final session on Thursday. In the end, the European session on Friday experienced a weakening again. It seems that the changes seen in US Treasury yields have caused the US Dollar index to decline even deeper.
One factor that has benefited the Japanese Yen is the pandemic concern that there has been no positive development. The highest risk is a second wave pandemic forcing the government to reinstate the lockdown policy. Doing so will destroy all hopes of a sharp global economic recovery. Seeing that, USDJPY fell because of risk aversion.
Additional strength for the US Dollar against traditional safe-haven The Japanese Yen still receives help from rising global stock markets. This will limit USDJPY down so it does not go deeper. Market participants and investors also seem to be in a careful mode waiting for certainty in the direction of global risk.
USDJPY Will Move After Clearer Risk
The further movement of the USDJPY pair will continue to wait for clearer risk direction before determining direction. Many unresolved issues such as the US-China conflict are heating up again. Update on the Coronavirus will also continue to be awaited by global investors.
For the closest, the pair will focus on the release of US economic data later tonight. The US is to release data on Michigan consumer sentiment. Vaccine news can also be a catalyst driving the pair if there are positive updates.
The risk-averse market atmosphere also seems to be continuously extended during the European session. Because the movement of one risky asset, the S&P 500 contract, remains in a negative bias.
So it can be said broadly that the risk is still very heavy to regain strength. This is certainly very beneficial to the safe-haven currency of the Japanese Yen. If this keeps happening, then USDJPY could fall deeper and score a much lower level.
US Dollar Able to Fight Risk, but USDJPY Still Experiencing Bearish
The movement of the US Dollar itself, when faced with risk assets, can excel and dominate. Because safe-haven also benefits the greenback. But no less good when compared to the Japanese Yen as an older safe-haven compared to the US Dollar.
One of the causes of this safe-haven strength is due to the increase in cases of Coronavirus in the US. Conditions that could confound the prospect of a significant US economic revival. In addition to the pandemic problem, risky assets are also under threat due to political upheaval in the US.
The US Supreme Court ruled that Trump's financial records could be seen. So that it can threaten Trump's position as an incumbent if there are suspicious transactions. A longer risk-off flow will bring USDJPY down. Although the US Dollar can also rise against risk assets such as global major currencies.
On Thursday, the demand for the US Dollar has again increased and saved the pair from a deeper decline. But in the end on Friday USDJPY was bearish again because risk-off took control of global financial markets. One reason is the very significant increase in cases in several US states.
Factors supporting the pair on Thursday may be due to data on US employment that is higher than initial expectations. However, the surge in cases in the US limits the tone of optimism. NFP data is far higher towards 4.8K compared to initial expectations of 3K. Meanwhile, US unemployment is also better towards -11.1% compared to initial expectations of -12.3%.
