USDJPY analysis 04.03.2020

The fluctuation of the US dollar in a narrow range slanting upward during the Asian session to witness its rebound from the lowest since October 8 of 2019 against the Japanese yen amid the scarcity of economic data by the Japanese economy and on the cusp of developments and economic data expected today Wednesday by the US economy .

At exactly 05:51 AM GMT, the US dollar pair rose against the Japanese yen by 0.26% to 107.41 levels compared to the opening levels at 107.40, after the pair achieved its highest level during the trading session at 107.52, while achieving the lowest in five months at 106.85 .

This was followed by yesterday, Japanese Prime Minister Shinzo Abe, expressing his government’s readiness to expand the fiscal stimulus policy and launching a spending package to face many risks, indicating that this package will be funded from the surplus of the current fiscal year’s budget, which expires at the end of this month and the fiscal budget for the year. The next fiscal, adding that his government is closely watching the impact of the Corona virus on the global economy and Japan

Also, Japanese Prime Minister Abe stressed yesterday that his government will not hesitate to take more steps to support demand in the third largest economy in the world, and this came hours after he expressed last Monday that he was preparing a law enabling him to declare a state of emergency in his country because of the spread Corona virus, which is a coronavirus that started in Wuhan, China and has spread recently in many countries including Japan.

In another context, we also followed on Monday, Bank of Japan Governor Harhiko Kuroda pledged that the Bank of Japan would take the necessary steps to stabilize financial markets, and the Japanese central bank quickly showed the type of measures it would take by offering to buy 500 billion yen ($ 4.6 billion) of Government bonds by repurchase agreement to provide liquidity to market participants, which in turn contributed to allaying investor anxiety about the risks of spread.

On the other hand, investors are waiting for the US economy to disclose preliminary data for the labor market with the release of the index of change in private sector jobs, which may reflect a slowdown in the pace of job creation to 170 thousand added jobs compared to 291 thousand added jobs in January. Hours before the disclosure of the monthly report of jobs except agricultural and unemployment rates in addition to the hourly rate for the month of February after tomorrow, Friday.

This comes before we witness the issuance of the final reading of the Service Supply Institute index by Marquette about the United States, which may reflect the stability of the contraction at 49.4 unchanged from the initial reading of last month and against a widening at 53.4 in January, and before revealing the reading of the Institute's index Service supply, which may show a shrinkage in capacity to 54.9, compared to 55.5 in January.

We would like to point out that the importance of service provision lies in the fact that the service sector in America represents more than two-thirds of the gross domestic product, and finally the market is looking to unveil the Big Book, whose importance lies in the fact that it is issued two weeks before the meeting of the Federal Open Market Committee, which is scheduled to be held on 17-18 March is expected to reveal the Committee's expectations for the future of interest rates and the rate of growth, inflation and unemployment for the next three years.

This comes hours after the sudden meeting of the Federal Reserve yesterday, during which members of the Federal Open Market Committee decided to reduce the interest on federal funds by 50 basis points to between 1.00% and 1.25% after being installed in the previous two meetings of the Federal Reserve at between 1.50% And 1.75%, and after reducing it three times by 25 basis points in previous meetings last year.

In the same vein, we also followed yesterday, Tuesday, the press conference held by Federal Reserve Governor Jerome Powell after the decision to suddenly reduce markets to short-term benchmark interest rates, through which he noted that the decision came to support the American economy, while touching that over the past years wages increased The labor market has improved and the Committee has repeatedly stressed that the current monetary policy is appropriate.

Powell also expressed yesterday that several risks have arisen and the current situation has become in a state of uncertainty, which made the Federal Committee see the existence of fundamental changes that prompted it to take a reaction, adding that over the next months and weeks the committee will work to monitor markets and developments and take appropriate decisions to support the economy, He explained that the American economy is strong, but it is difficult to determine the extent of the negative effects of the spread of the Corona virus locally and globally.

Powell stressed during the press conference that the committee’s decision to cut interest at Tariq’s meeting for the first time since the global financial crisis that occurred more than a decade ago and by 50 basis points, which is rarely made by the Federal Reserve, is not a political decision but rather stems from a vision The Federal Committee for Current Events, and this came in the wake of US President Donald Trump's call repeatedly for the Federal Reserve and Powell County to cut interest and expand stimulus.

Technical analysis

The dollar versus the yen made a strong break of the 107.42 level yesterday, and closed the daily candle below it, reinforcing the expectations of the continuation of the downtrend during the coming period, awaiting further decline to visit the 106.28 level, which represents our next stop.

SMA 50 continues to support the suggested descending wave, which will remain intact unless 108.34 level is breached and stability above it.

The expected trading range for today is between 106.60 support and 108.00 resistance.

Expected trend for today: bearish.