Last week, an old-fashioned warning from the Bank of Japan (BoJ) combined with the prospect of more stimulus spending in the United States gave the USD/JPY a modest boost back to 104.00. Joseph Trevisani, an Analyst at FXStreet, sees the pair drifting lower in the week ahead.
Key quotes
“Technically, the inner descending channel that returns to early July and the outer that began with the pandemic panic in March, are intact. The lower border is now below 102.00 and falling. The market top on Friday at 104.09 scraped the upper border of the inner channel, but the close at 103.94 was again internal.”
“The disparity between the recently traded and numerous resistance lines and the scarce and weak support has helped keep the USD/JPY moving lower. There has been no real case for a technical reversal in over a year leaving the pair subject to the vagaries of the dollar. Neither the Japanese economy nor the central bank seem to have a capacity for positive surprises.”
“The basic issue for the USD/JPY is that the yen side is moribund except for the minor real interest rate advantage and the weak dollar scenario has not changed since March. Look for a drift lower in the week ahead as traders respect the technical formation, largely for the lack of anything better.”
“The USD/JPY falls because as yet, it has no good reason to rise, not because the case for yen strength is convincing. Until the dollar can shake off the US labor market blues the default move is lower.”
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