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Japanese Yen Forecast: USD/JPY Approaches Multi-Year Significant Level

Japanese Yen Forecast: USD/JPY Approaches Multi-Year Significant Level

2020-11-05 10:30:00
Justin McQueen, Analyst
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Japanese Yen, JPY Price Analysis & News

  • USD Weaker on Likely Biden Presidency
  • Watch US Yields for USD/JPY Direction
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USD Weaker on Likely Biden Presidency

Despite the fact that the results of the US election have yet to be confirmed, markets are continuing to price in the increasing likelihood of a Biden presidency with a Republican senate, which has driven the US Dollar lower across the board and thus has been a goldilocks scenario with risk sentiment firmer. In turn, with the weaker dollar, this has brought USD/JPY back to within close vicinity to the 104.00 handle, which has been a significant level that the pair has rarely held below in the past 5yrs.

Japanese Yen Forecast: USD/JPY Approaches Multi-Year Significant Level

Source: Refinitiv

Watch US Yields for USD/JPY Direction

Another factor to keep in mind for USD/JPY is US treasury yields, which have come off significantly in the past 24hrs from a peak of 90bps to 73bps at the time of writing. As such, this will be key for the direction in USD/JPY. Volatility in USD/JPY remained muted despite the US Election with the BoJ making sure they had all hands on deck.

BoJ Governor Kuroda “many in markets worry about impact of US elections on FXmoves, but USD/JPY moving stably in narrow range, will carefully watch FX market developments”

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In turn, with the absence of renewed risk aversion, the 104.00 handle could perhaps be a tough level to break, particularly as this level has previously seen Japanese Officials step up their intervention rhetoric, prompting the pair carve a triple bottom.

USD/JPY BULLISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -5% 11% 0%
Weekly -13% -6% -11%
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Japanese Yen Forecast: USD/JPY Approaches Multi-Year Significant Level

Source: Refinitiv

USD/JPY Technical Levels

Near-term support resides at the psychological 104.00 handle, where a break below opens the door to 103.50-60. On the topside, offers from 105.00 and 105.33 (50DMA) are likely to keep upside limited.

Option expiries: 103.00 ($1.26bln), 104.00 ($493mln), 105.00 ($750mln)

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

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