Yen yesterday felt more confident than all other world currencies against the US dollar, even despite the steady growth of the index of the latter. The whole reason for this unexpected and quite strong depreciation of USD / JPY lies in the total sales on global stock markets. American stocks yesterday a total of 4.5% sank. Today, in a similar vein, trading took place on Asian stock markets. As is known, the USD / JPY currency pair is very closely correlated with the stock market, since the yen is considered the main funding currency in the framework of carry trade operations. Accordingly, the current situation makes investors actively sell off shares and float in safer assets that traditionally stand for gold and the yen.
This morning, while the currency pair is adjusted on the comments of the head of the Bank of Japan that the regulator does not intend to make changes in the target parameters for interest rates and asset repurchase program and intends to maintain the current soft monetary policy. Once again, denying the servants of a possible tightening of monetary policy in the short term.
Nevertheless, the situation on the stock markets remains quite complicated and it is likely that the US stock market will continue to fall today, which will have a very strong support for the yen and, accordingly, will put pressure on the USD / JPY pairs.
Technically, the currency pair is still in the resulting range 108.50-111.20. And while the price will be kept above the level of 108.50, the scenario with range trading will remain a priority. At the same time, in the event of a breakdown of support at 108.50, the currency pair risks continuing its decline first, in the direction of the level of 108.00, and in case of breakdown it may be even lower. This scenario is still supported by indicators that, despite the local correction, continue to decline actively.
Review prepared by Fort Financial Services Research Department. Follow our publications!