Japanese Yen, Dow Jones, S&P 500, U.S. Fiscal Stimulus, Coronavirus – Asia Pacific Market Open
- Japanese Yen falls, Dow Jones futures rise as Trump announces fiscal measures
- Market follow-through is uncertain for time being, NZD/USD faces Orr speech
- Majors-based JPY index struggled confirming a key resistance break for now
BREAKING: U.S. President Donald Trump Announces Possible Fiscal Stimulus
The anti-risk Japanese Yen may see near-term losses after the worst day on Wall Street since 2008. Equities are fast approaching bear market territory amid coronavirus epidemic woes. As a result, U.S. President Donald Trump announced possible fiscal stimulus measures. The JPY cautiously fell, sending USD/JPY higher, with an uptick in S&P 500 futures. This sent the latter to reverse losses of about -1.5% prior to the announcement.
According to Trump, officials will be looking to discuss a possible payroll tax cut with Congress along with relief for hourly wage earners. The President is scheduled to hold a news conference on Tuesday where he said that he will reveal “very dramatic” measures to help support the economy. This marks a u-turn after the end of last week where Mr Trump cast doubt on immediate measures, speaking to the urgency of the situation.
At Wall Street open Monday, heavy losses resulted in circuit breakers temporarily suspending trade for 15 minutes. By the end, the Dow Jones and S&P 500 closed -7.79% and -7.60% to the downside. Further complicating matters was a -27.31% plunge in crude oil prices and CAD weakness – as expected. That was the worst day since 1991 after Saudi Arabia initiated a price war following a collapse in OPEC+ output reduction talks.
Tuesday’s Asia Pacific Trading Session
Prospects of fiscal stimulus from the world’s largest economy may help alleviate some of investors' worries in the near term. This is of particular importance due to the limitations of monetary policy easing efforts from developed nations in the aftermath of the 2008 financial crisis. An emergency 50-bp rate cut from the Federal Reserve was unable to quell the selloff on Wall Street last week.
Follow-through in markets is uncertain and ought to be treated with a grain of salt until further details of these measures and their implementation is known. Meanwhile cases of the coronavirus are likely to grow. For now, the Canadian Dollar is gaining alongside sentiment-linked crude oil prices. The “pro-risk” Australian Dollar and similarly-behaving New Zealand Dollar are higher.
NZD/USD will also be closely watching incoming commentary from RBNZ Governor Adrian Orr. Due at 1:00 GMT, he will be speaking about the use of non-standard monetary policy tools. Yesterday, local Finance Minister Grant Robertson hinted that unconventional measures from the RBNZ are “not on the cards”. So, today’s speech by Orr may reveal other policies that underscore dovish expectations. That may sink NZD.
Japanese Yen Technical Analysis
The Japanese Yen generally had its best performance since the 2016 Brexit Referendum. On the chart below is a majors-based JPY index, averaging it versus USD, AUD, GBP and EUR. Prices were unable to confirm a daily close above 2019 peaks, leaving behind a large upper shadow that stopped short on the 2016 high. A daily close above the former may pave the way for further upside progress. Otherwise, a turn lower places the focus on immediate rising support from February.
| Change in | Longs | Shorts | OI |
| Daily | -6% | 8% | 5% |
| Weekly | -8% | 0% | -2% |
Majors-Based Japanese Yen Index Daily Chart
Chart Created Using TradingView
--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
