USDJPY analysis 16.03.2020

The dollar fell to witness its bounce for the second session from the top since March 3 against the yen, amid growing fears of a global outbreak of the Corona virus and after the Fed cut interest in a sudden meeting of the markets by 100 basis points to return to the zero levels reached after the exacerbation of the financial crisis Global In the wake of the developments and economic data that it adopted on the Japanese economy, which also included a surprising meeting of the Bank of Japan, in which the stimulus was also expanded and on the cusp of developments and economic data expected on Monday by the American economy.

At exactly 6:19 am GMT, the US dollar pair fell against the Japanese yen by 0.88% to 106.35 levels compared to the opening levels at 107.29, after the pair achieved its lowest level during the trading session at 105.74, while achieving the highest at 107.57, knowing The pair concluded the trading last week at 107.62 levels, before it started the trading session on a falling price gap.

We have followed about the Japanese economy, the third largest economy in the world and the third largest industrialized country in the world, to reveal the reading of the machinery orders index, which showed a rise of 2.9% compared to a decline of 12.5% ​​last December, surpassing expectations that indicated the decline to 1.0%, while The annual reading of the same index showed that the decline decreased to 0.3% compared to 3.5%, also exceeding expectations that indicated a decrease in the decline to 1.1%.

This came before we witnessed the adoption of monetary policy makers at the Central Bank of Japan at an emergency meeting held in place of the meeting scheduled on 18-19 March, to maintain negative interest rates at 0.10%, with the disclosure of the monetary policy statement of the Bank of Japan, which reflected the presentation of Further stimulus, with the goal of buying corporate bonds raised by 2 trillion yen, and markets are looking forward to the upcoming press conference by the Bank of Japan Governor in Tokyo.

On the other hand, we also followed a short while ago, the surprising meeting of the Federal Reserve, which is the second in less than two weeks, which took place on the 15th of this month after the previous surprising meeting on the third of March, which approved the monetary policy makers at the Federal Reserve Bank Returning short-term benchmark interest rates to zero levels reached in the wake of the worsening global financial crisis more than a decade ago.

The members of the Federal Open Market Committee reduced the interest on federal funds by 100 basis points to between zero levels and 0.25%, which they remained from 2008 until the meeting of 27-28 October 2015, after reducing them in the previous emergency meeting by 50 points. The basis is between 1.00% and 1.25%, and this comes in the wake of the committee members cutting interest three times by 25 basis points in previous meetings last year.

The Federal Reserve monetary policy statement stated that the decision to reduce will be effective from Monday 16 March, and that the Federal Open Market Committee will carry out repurchases of treasury bonds with a minimum of $ 500 billion per month and mortgage-backed securities of $ 200 billion At least monthly, provided that these purchases are made at the appropriate speed to support the smooth performance of the stock market, treasury and mortgage markets.

The statement also stated that the forward and night repurchase agreements are being carried out to ensure that the supply of reserves remains ample and support the smooth performance of the US dollar financing markets in the short term, and this came an hour and a half before the press conference held by Federal Reserve Governor Jerome Powell and minutes before the conference The reporter was held by US President Donald Trump and his deputy Mike Pence, as well as members of the Corona Virus Team.

This has been noted by Federal Reserve Governor Powell a little while ago that the American economy is still growing despite rapid developments and that the Corona virus has a clear impact on the American economy and the world, pointing out that the repercussions of the virus will be clear in the short term and affect economic expectations, adding that the global economic weakness will be It has a negative impact on US exports.

Powell said that in light of these developments, the Federal Committee decided to cut interest to zero levels and that it is expected to remain until the confirmation of the end of risks and the return of the economy to moderate growth and achieve the optimal exploitation of the labor market and achieve the goal of inflation at 2%, adding that the Federal Reserve coordinates with major central banks such as The Bank of Canada, the Bank of Japan and the Bank of England and that the major banks have agreed to cut rates and that they will work to provide liquidity in dollars.

Powell also stated that monetary policy in the United States was noticeably tightening it and that he did not think it would be appropriate to resort to negative interest in the United States, adding that monetary stimulus is required by the American administration, with his statement that the American banking sector is strong and has a lot of head Money and liquidity, and that the Federal Open Market Committee will not meet on March 17-18, as previously planned, and that meeting will be sufficient for it.

We would like to point out, since the US President Trump welcomed the decisions of the Federal Committee just a moment ago and his wonderful recommendation, otherwise, it is mentioned that the US administration announced last weekend a national emergency in the United States, which will save more than $ 50 immediately in disaster relief funds. And, as the Republican President Trump's administration also came up with a new legislation package that will provide support to American families and societies in dealing with the Corona virus.

We would like to point out that the forty-fifth Trump President recently criticized the performance of Federal Reserve Governor Powell, explaining that he believed that the Federal Committee would be and should be more proactive, adding that the United States has the number one currency in the world by an expanded difference and that the federal currency is strong To a large extent, he expressed that the dollar is strong and that the Federal Reserve is not doing what it should do.

In the same context, Trump noted that the interest on federal funds should not be higher than the competing countries for America, with his mention that the interest in Germany is basically below zero, it is negative, and that there are many countries with interest as negative as Japan and other countries, while his country pays Interest is higher, adding that what he wants is to refinance America's debt and that it is possible and easy at a lower price, expressing we have tremendous opportunities now, because Jerome Powell does not make it easy.

Otherwise, the markets are looking to the US economy, the world's largest industrialized country, to disclose industrial sector data with the release of the New York Industrial Index reading, which may reflect the shrinkage of the expansion to 5.1 compared to 12.9 in February, and this comes in conjunction with the activities of the Group of Seven summit (Canada, Italy France, Germany, Japan, the United Kingdom and the United States) will be established via satellite and will discuss measures to deal with the economic impact of the outbreak of the Coronavirus.

Technical analysis

The dollar against the yen succeeded our positive goals mentioned in our last report at 106.68 and 107.98 and stopped at the last level, and begins today with a marked negative to attack the first level that forms a support floor after penetration previously, with the indication that we are likely to resume the upside during the upcoming sessions, and it needs Price to hold above 105.38 to keep the positive scenario effective.

A breakout of 107.98 is required to confirm the bullish wave extending towards 109.60 then 111.30 levels, keeping in mind that a break of 105.38 will stop the expected rise and put the price under negative pressure again.

The expected trading range for today is between 106.00 support and 108.00 resistance.

Expected trend for today: bullish.