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USD / JPY. Kuroda’s pessimism, closed Japan and anticipation of fiscal stimulus

DATE OF PUBLICATION: 2021-01-14 19: 20: 00 Exactly one week later – on January 21 – the first meeting of the Japanese regulator this year will take place. According to most experts, the Bank of Japan will keep all the parameters of monetary policy in the same form, despite the worsening epidemiological situation in the country. At the same time, today the head of the Central Bank Haruhiko Kuroda warned that this issue remains open. According to him, the regulator is ready “without hesitation” to take additional steps to ease monetary policy – if necessary. And although Kuroda repeats this phrase with enviable regularity, the position of the Japanese yen has again faltered. The head of the Central Bank voiced rather pessimistic rhetoric, making it clear that the regulator will maintain the previous accommodation rate and a low interest rate. However, “internal” fundamental factors affect the dynamics of the Japanese currency insofar as. The yen focuses primarily on the external fundamental background, which determines the level of general demand for protective instruments. Immediately after the high-profile events in the US capital, the usd / jpy pair collapsed to the middle of the 102nd figure, but later buyers seized the initiative. Firstly, the political battles in the United States have become predictable, and secondly, the traders of the pair “succumbed” to the strengthening of the American currency, which is growing against the background of rising Treasury yields, in anticipation of large-scale fiscal stimuli. The so-called “coronavirus” factor acts locally. If at the beginning of 2020, traders tracked the dynamics of the spread of COVID-19 around the world, responding to constantly updated anti-records, at the moment the impact of the coronavirus, so to speak, has been “localized.” For example, yesterday the yen slipped on reports that an emergency regime was introduced in four more prefectures in Japan. The regime will now affect 11 of the 47 prefectures, where more than half of the country’s population lives. In fact, we are talking about a lockdown with all the ensuing consequences – including for the national economy. In addition, the Japanese have completely closed themselves off from foreigners. Japan isolated itself at the end of December, but businessmen from 11 countries with which business agreements were in force could still get into the country. We are talking about businessmen and business delegations from countries and regions of Asia, including China, South Korea, Thailand, Vietnam, Singapore and Malaysia. Now they were also banned from entering – at least until February 7th. According to Johns Hopkins University, Japan has 302,000 COVID-19 cases (out of a population of 125 million). More than 4,000 people have died from coronavirus complications, and amid new quarantine restrictions on the market, rumors have re-emerged that the Bank of Japan will ease monetary policy next week. Today, these conversations intensified after a speech by Haruhiko Kuroda, who said that “the country’s economy is in a difficult situation.” At the same time, he again repeated the phrase that the regulator “without hesitation” will take additional policy easing measures if the Central Bank members come to the conclusion that such measures are necessary. Obviously, we are talking about expanding the incentive program. Also, the Bank of Japan may lower the target for long-term rates and intensify asset purchases, while accelerating the pace of expansion of the monetary base. It is possible that the above options will be combined. In other words, the yen has no “own” arguments for strengthening. Therefore, traders usd / jpy will focus primarily on the behavior of the American currency. Which, in turn, is waiting for additional fiscal stimulus. Today, the American media, citing anonymous sources in Biden’s team, reported that the amount of additional aid could be increased to $ 2 trillion. Such prospects keep the greenback afloat – including in tandem with the Japanese currency. According to preliminary information, the expansion of the “bailout package” will be announced this week – through the mouth of Janet Yellen or Joe Biden. Medium-term growth prospects: Technically, the pair also retains potential for further growth – at least towards the upper line of the Bollinger Bands indicator on the daily chart, which coincides with the lower border of the Kumo cloud and corresponds to the price level of 104.40. In addition, if the Tenkan-sen and Kijun-sen lines cross at D1 (and they are very close to this), then the Ichimoku indicator will form a “Golden Cross” signal warning of a trend change. This fact will open the way to the next resistance level 104.70 (the lower border of the Kumo cloud on the same timeframe). However, for such a price breakthrough, an appropriate news feed is needed, which will obviously be associated with the expansion of the package of additional assistance to the US economy. Material provided by InstaForex – Source – InstaForex

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