- USD/JPY performs sideways on Friday morning.
- Bank of Japan turns to big data for economic analysis.
- Japan maintains interest rates despite slashing forecasts.
The USD/JPY kicked off Friday morning with some sideways action indicating the lack of directional momentum. This is despite being bearish for the first half of the week although the bulls regained control allowing the exchange rate to rally back. The neutral performance on Wednesday highlights investor caution after the Bank of Japan decided not to adjust interest rates while also lowering its forecasts.
Time : 07-17-2020
Pivot : 107.21
Technical View : Long Above 107.41
Target : 107.61, 107.78, 108.08
Technical View : Short Below 107.01
Target : 106.81, 106.62, 106.39
The USD/JPY sideways performance on Friday morning indicates a lack of momentum as both currencies. This comes after heavy economic news releases that resulted in a lot of volatility around mid-week. Among those reports is the Bank of Japan’s announcement on Wednesday revealing that it would maintain a steady monetary policy as the country’s economy attempts to get back on its feet.
Just like many other economies in the world, Japan was heavily affected by the coronavirus and this impacted the country’s economy. The BOJ expects the economy to continue improving gradually for the remainder of 2020 especially with the reports of a potentially viable vaccine boosting investor confidence.
The coronavirus is still a global problem that is yet to be solved which means that the economy will not recover completely until the viral threat is subdued through a vaccine or cure. This may have influenced the BOJ’s decision to slash its economic outlook.
Meanwhile, the BOJ has reportedly switched to using big data for its data research at its research and statistics department. This shift to unconventional data sources was driven by the current uncertainties that exist in the market. Big data is expected to help provide more reliable data points by observing more complex data such as the movement of people in a factory and the global movement of cargo ships loaded with vehicles.
As far as the USD/JPY outlook is concerned, the expectation of economic recovery albeit at a slow pace should provide a buffer for the Japanese yen against the U.S dollar. However, the market is still characterized by a lot of uncertainty which will certainly influence investor decisions.