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USDJPY Pressing Down on Support as US Election, Covid Lockdowns Fuel Risk Aversion

USDJPY Pressing Down on Support as US Election, Covid Lockdowns Fuel Risk Aversion

Nick Cawley, Senior Strategist

USDJPY Price, News and Analysis:

  • Japanese Yen bid as the Covid-19 pandemic fuels risk-aversion.
  • USD/JPY looking to set a new multi-month low.
  • IG client sentiment is bearish.

The ongoing spread of the Covid-19 virus, and assorted national lockdowns, coupled with the upcoming US election is driving investors into the risk-averse Japanese Yen, sending USD/JPY back towards multi-month lows. In Europe, France and Germany are the latest countries to introduce new national lockdown measures as coronavirus new cases and fatalities hit unwanted records, while a new study in the UK suggests that nearly 100k people a day are catching the virus compared to official figures in the low 20,000s. Stock markets remain under threat of further sharp sell-offs, while the upcoming US presidential elections will likely fuel further short-term volatility going into next week. The market reaction to the election will remain a driving force behind USD/JPY in the days ahead.

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The bid for the Japanese Yen, and the current weakness in the US dollar, can be clearly seen in USD/JPY. The pair seem set to break lower and re-test the September 21 multi-month low of 104.00, despite the CCI indicator flashing an oversold signal. A print below 104.00 will also continue a series of recent lower lows, which when taken alongside the recent lower highs would add another layer of negative sentiment. The USD/JPY 104 level may see the Bank of Japan (BoJ) opine on Yen strength in an effort to curtail its rise, but with the current high degree of short-term volatility, this may not be enough to prevent the pair from moving lower.

USDJPY Daily Price Chart (March – October 29, 2020)

Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 1% 4% 3%
Weekly -3% -5% -4%
What does it mean for price action?
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IG client data show 74.11% of traders are net-long with the ratio of traders long to short at 2.86 to 1.We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/JPY prices may continue to fall.

Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/JPY-bearish contrarian trading bias.

What is your view on the Japanese Yen – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.