WEEKLY NOTION - Joe Biden as the New U.S. President & Currency Pairs to Look Out For - Nov 8, 2020
The dollar dropped to its lowest level in over two months against a basket of peer currencies on last Friday, as the contentious U.S. election dragged on and the result met the expected victory of Joe Biden as the next president on Nov 7, 2020.
Japan Times reported that the government and Bank of Japan officials are keeping a close eye on foreign exchange rates following Democrat Joe Biden’s victory in the U.S. presidential election.
They are concerned that any sharp rise in the yen’s value against the dollar will deal a serious blow to the Japanese economy already struggling with the coronavirus pandemic, sources familiar with their thinking said.
As pointed by FXEMPIRE's analyst, James Hyerczyk, the U.S. dollar/Yen fell sharply last week and traders are expecting more losses as the election of Democrat Joe Biden and the Republican strength in the Senate are likely to make it difficult for the Democrats to promote Biden’s agenda.
Last week, the USD/JPY settled at 103.370, down 1.302 or -1.24%.
The analyst at FXEMPIRE added:
Historically, a Japanese Yen spike has been a trigger for monetary policy easing by the Bank of Japan (BOJ), i.e. flood the market with Yen to weaken the currency. Additionally, policymakers have been known to jawbone and use the news to try to talk the Japanese Yen lower in order to prevent a strong currency from hurting Japanese exports.
However, he remains uncertain at the exact stage when the BOJ will intervene, as many countries are also upping their efforts to drive their currencies relatively competitive to retain exports.
Meanwhile, NordFX pointed out in a recent analysis that the diversion of investors from the dollar towards stocks, bonds, gold, bitcoin and the euro may be premature.
From a technical perspective, the analysis shown that 100% of the trend indicators on H4 and D1 are still green, but among the oscillators, 25% are already giving signals that the pair is overbought, which indicates a possible downward trend reversal or a serious correction. The trend reversal is also indicated by graphical analysis on D1.
On the near-term expectation of the pair, NordFX stated:
The pair is in a strong mid-term support/resistance zone 1.1880-1.1900 now. The nearest support levels are 1.1760, 1.1700 and 1.1610. Resistance levels are 1.1965 and the September 01, 2020 high of 1.2010. It should be borne in mind here that this maximum is the highest point at which the pair has been located since May 2018. And if EUR/USD continues its northward movement, its main target is likely to be the zone 1.2200-1.2400.
With the election result announced yet Brexit's prospect continues to remain cloudy, this pair is still presenting a rather vague near-term outlook. Nonetheless, NordFX pointed out in the same analysis as above that most experts (70%) tend to continue its uptrend – first to 1.3265, and then perhaps to the high of Sep 1, 2020 at 1.3480. The nearest resistance is 1.3175.
Similar to most experts, the analysis also expressed that 100% of the trend indicators and 75% of the oscillators on H4 and D1 point to the north, while the graphical analysis looks to the south as well as 25% of the oscillators which are signaling the pair is overbought. Supports are 1.3085, 1.3000, 1.2855. The next target of the bears is 1.2755, but it is unlikely to be reached in the coming week.
Source: Reuters, Japan Times, FXEMPIRE, NordFX
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