On Tuesday, several factors conspired to push the USD/JPY to its lowest level since October 1. As a result of the COVID-19 difficulties, the risk-off mentality benefited the safe-haven JPY while also exerting significant pressure.
The sharp reduction in the rates on US government bonds weighed on the Dollar and contributed to its depreciation.
Technical Analysis Of The USD/JPY
USD/JPY CHART Source: Tradingview.com
After maintaining its aggressively offered tone during the first half of the North American session, the USD/JPY pair was last seen moving near the 112.75-70 zone, which was the duo’s lowest point since October 11.
After the preceding day’s two-way price movements, the USD/JPY pair saw a new supply on Tuesday, extending its retracement decline from a near five-year high in the mid-115.00s, which was reached just a few days earlier.
An Overview Of The Fundamentals
The relatively secure Japanese Yen received a significant lift as a result of the risk-off trend in the markets. This, combined with a general drop in the value of the US Dollar, has led to the pair’s continued decline.
Global risk perception has taken a knock as investors become increasingly concerned about the possible economic ramifications of the emergence of the latest coronavirus strain.
After the chief executive of pharmaceuticals, Moderna, cautioned that preexisting vaccines will be substantially weaker against Omicron than prior strains of COVID-19, the industry’s concerns were compounded even further by the announcement.
Meanwhile, the revelations around the coronavirus story have forced back market predictions about the expected timing of the Federal Reserve’s decision to begin stiffening fiscal policy in response to it.
The currency markets are now indicating a 25-basis point rate hike in September 2022, as opposed to the rate hike previously put in for July 2022. This, combined with the global exodus to safety, resulted in a precipitous decrease in the rates on US Treasury securities.
It was believed that this, in turn, hurt the Dollar and was yet another factor contributing to the increase in bearish influence around the USD/JPY pair.
Aside from that, any technical trading below the 113.00 barrier could also be a contributing factor to the decline.
Acceptance underneath the aforementioned handle may have already set the foundation for a prolongation of the corrective movement to take place.
Market players are now looking forward to the US economic calendar, which will include the release of the Chicago Purchasing Managers’ Index (PMI) and the Conference Board’s Consumer Confidence Indicator.
Meanwhile, all attention will be on Fed Chair Jerome Powell’s hearing before the Senate Banking Committee, which might have an impact on the value of the Dollar. This, together with the general risk-averse mentality in the market, should give some support to the USD/JPY pair.