USDJPY analysis 27.08.2020

The US dollar fell during the Asian session to witness its lowest since April 15, when it tested the lowest since the beginning of this month against the Japanese yen after the developments and economic data that were reported by the Japanese economy and amid the scarcity of economic data by the US economy at the beginning of this week which carries It includes the actuals of the Federal Open Market Committee meeting tomorrow, Tuesday, and Wednesday in Washington.

At exactly 06:30 am GMT, the US dollar pair declined against the Japanese yen by 0.39% to 107.14 levels compared to the opening levels at 107.56 after the pair achieved its lowest level in two weeks at 107.13, while it achieved its highest during the trading session at 107.64, with Knowing that the pair started the trading session on an upward price gap after it concluded the trading last week at 107.51 levels.

A few minutes ago, we followed the monetary policymakers at the Japanese central bank at the April 27 meeting, which was shortened as a precaution against the spread of the Coronavirus, to stay on the short-term reference interest rates at 0.10%, which came in line with expectations. And with the disclosure of the Bank of Japan monetary policy statement, which reflected the Japanese central bank's further stimulus.

In the same context, the monetary policy statement indicated that the monetary policymakers of the Bank of Japan raise the maximum purchase of corporate bonds and commercial securities that it pledges to buy to 20 trillion yen from 7 trillion yen previously, as well as the Japanese central bank’s commitment to purchase unlimited quantities of Government bonds by canceling the previous purchase guidance at an annual pace of about 80 trillion yen.

The central bank’s monetary policy statement included a paragraph, “The Bank of Japan will purchase the necessary amounts of government bonds without setting an upper limit, so that the yield of 10-year bonds will remain at around zero percent.” This came before we witnessed the BoJ Governor Haruhiko Kuroda’s press conference in Tokyo, which affirmed that the Japanese central bank has moved forward in providing support to the third-largest economy in the world.

In another context, investors are also looking by the Japanese economy to disclose labor market data with the release of the unemployment rate reading, which may reflect an increase to 2.5% compared to 2.4% last February. It is reported that the Japanese Minister of Economy Yasuchi Nishimura noted last Friday that the stimulus package approved by the Japanese government, which is estimated at 1.1 trillion yen, will boost the GDP of the third-largest economy in the world by 4.4%.

On the other hand, investors are awaiting tomorrow, Tuesday, to the launch of the FOMC meeting, April 28-29, in which interest rates are expected to remain at zero levels between zero and 0.25%, before we witness the day after tomorrow, Wednesday. Acts of the press conference that will be held by Federal Reserve Governor Jerome Powell half an hour after the activities of the Federal Committee meeting in Washington.

We would like to point out, that the Federal Reserve monetary policymakers adopted at the previous Federal Open Market Committee meeting held on March 15th that surprising meeting, which was the second in less than two weeks after the previous sudden meeting on the third of the same month, to return interest on Federal funds to zero levels, while reducing interest rates at the time by 100 basis points from between 1.00% and 1.25%.

It is noteworthy that the return of the members of the Federal Open Market Committee to the interest of the federal funds to the zero levels that remained since 2008 until the meeting of 27-28 October 2015, and came after reducing them in the previous emergency meeting by 50 basis points from between 1.50% and 1.75 %, And after the committee members cut interest three times by 25 basis points in previous meetings last year 2019.

Technical analysis

The dollar versus the yen maintains its stability below 107.68, to keep the negative pressure in place, supported by the negative signal provided by the stochastic, awaiting the rally towards 106.44 which represents our next target.

We remind you that the continuation of the expected decline requires stability below 107.68 and 108.25, as breaching these levels will lead the price to achieve real-time gains aiming to visit the 109.22 level initially.

The expected trading range for today is between 106.50 support and 108.30 resistance.

Expected trend for today: bearish.