Whereas 2020 will be memorable in many ways, USD/JPY behavior might not. For this year, USD/JPY has fallen roughly 500 pips. The pair is set to keep falling in the year of healing as Japan’s cultural advantage over the US might result in a faster economic comeback, Valeria Bednarik, Chief Analyst at FXStreet, reports.
Key quotes
“Given Japan’s better performance in controlling outbreaks and its long discipline tradition, it seems that the Asian giant has an advantage over its Western rival when it comes to returning to normal.”
“The US is a consumer nation. The key would be job creation. Whereas the US is capable of creating employment, the local economy would bloom. And inflation will run towards the central bank target much faster than in Japan, which has been incapable of defeating deflation for decades. Still, 2021 won’t be the year of the comeback. It will be the beginning of the process. Luckily, by the last quarter, the world will be able to see the light at the end of the tunnel.”
“Should USD/JPY break below the 101.17, the next bearish target comes at the mentioned 98.95. Only a steeper economic downturn and panic over the future can see the pair losing this last in 2021 and result in a further 400-pip decline.”
“The bearish case will remain firmly in place as long as the USD/JPY pair trades below a descendant trend line coming from March 2020 high at 111.70, currently around 105.00. Beyond this last, the pair’s recovery can extend towards 106.40. An advance beyond this last should see a tide change, with bulls taking over and targeting the critical 110.00 threshold.”
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