USD/JPY Can’t Beat 106.23 Level: The Wider Context

The US dollar is rising against some of the world’s leading currencies at the moment – due to both the fears around the coronavirus pandemic and the price of US bond yields.

However, the Japanese yen is not one of them.

In this pair, the greenback is experiencing significant challenges to its value.

The two currencies are in essence battling it out to become the dominant safe haven during the current period of pandemic-related market jitters.

The yen makes this claim based on the fact that Japan is one of the world’s major creditors.

The dollar makes it on the basis that it is highly liquid and always in demand as cash.

According to analysts, the winner in this pair at the moment appears to be the yen.

Price chart action suggests that the value of the dollar, which is dropping, is set to go down further.

It has been unable to surpass one of its key moving average points of 106.23.

The Relative Strength Index, which tracks how overbought or otherwise the currency may be, is also pointing towards a bearish future for the pair.

Some analysts are now suggesting that the 104.45 point on the price chart could be hit next.

Overall, the year-long low point – which is just higher than 101 – could be hit next.

Away from the price charts, meanwhile, the fundamental content for the pair is looking crowded.

The economic calendar shows that there will be a Tokyo consumer price index out late on Monday.

This release, which is due out at 11:30pm GMT, will cover the month of September and is set to show no change from its previous position of -0.3% year on year when fresh food is taken out of the equation.

When that is left in the equation, however, the overall price index is set to show a jump from 0.3% to 0.4%.

As the day finishes, meanwhile, the Bank of Japan’s summary of opinions will be released at 11:50pm GMT.

This is expected to show some forecasts from the bank about how inflation is set to play out in the coming year.

Looking ahead to Tuesday, there is set to be some intense central banking action on the cards in the US.

Speeches from a wide range of Federal Reserve leaders are expected – including John C. Williams, who heads up the Federal Reserve Bank of New York.

He will speak at 1:15pm GMT and then later at 5pm GMT.

Richard Clarida, who is the bank’s vice chair, will speak at 3:40pm GMT.

Randal Quarles will speak at 5pm GMT and then again at 7pm GMT.

The day will be rounded off with a retail trade release for August from Japan.

This is set to show a month-on-month move from -3.3% to +3.2% when it comes out.

About the author: Justin Freeman

Justin is an active trader with more than 20-years’ industry experience of working for big banks and hedge funds. He has an inside knowledge of how the financial markets work, thanks to roles including trader on a $750m Event-Arbitrage desk and CRO and COO of hedge funds running a variety of strategies. From stat-arb and trend-following CTA to fixed-income relative value. Firm’s he has worked at include big banks like Citi, and prominent hedge funds including D. E. Shaw and Millennium Capital Management.

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