Will US yields drop back below 1.00%, and put pressure on the USDJPY on Friday?

März 20, 2020 10:30

Source: Economic Events March 20, 2020 - Admiral Markets' Forex Calendar

Volatility in forex markets and US yields remained dramatic over the last few days, and thus also in the highly yield-sensitive USD/JPY.

Interestingly enough, and despite the fear among market participants keeping selling pressure on Equities high, the USD/JPY saw a re-test of the region around 108.50/109.00.

While one explanation comes from the sharp bounce in US-Treasury yields back above 1.00%, in addition to the massive USD shortage and re-installation of swap lines with global central banks from the Fed on March 15, may have added to the demand in the currency pair.

Still, taking a step back, we expect volatility to continue to stay very high, seeing US yields under further pressure, and thus we favour the Short-side in the USD/JPY, with a potential driver being today's Existing Home Sales numbers which are publish at 2pm GMT.

Any print that is significantly below markets expectation at 0.7% (MoM) would point to signs of significant negative impact from the Coronavirus pandemic on the US economy, and US yields could drop lower into the weekly close alongside the USD/JPY, making a test of the region around 105.00/30 into the weekly close an option.

On the other hand, we remain very cautious in regards to overly optimistic USD/JPY Short engagements. This is because not only do we expect further strong USD demand given the USD shortage, and usage of the re-installed swap lines of the Fed from the BoJ.

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between January 29, 2019, to March 19, 2020). Accessed: March 19, 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 USDJPY 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%.

Discover the world's #1 multi-asset platform

Admiral Markets offers professional traders the ability to trade with a custom, upgraded version of MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5 Supreme Edition!

Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
  3. Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
  4. To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
  5. Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
  6. The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
  7. Any kind of previous or modeled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
  8. The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
  9. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.
Avatar-Admirals
Admirals Eine Komplettlösung für das Bezahlen, Investieren und Verwalten Ihres Geldes

Admirals ist mehr als ein Broker. Wir sind der Dreh-und Angelpunkt für Ihre Finanzen, indem wir Ihnen eine breite Palette von Finanzprodukten und -dienstleistungen anbieten. Wir machen es möglich, persönliche Finanzen durch eine Komplettlösung für das Investieren, Ausgeben und Verwalten von Geld anzugehen.