The dollar / yen is trading lower early Tuesday after posting a steep decline the previous session. After moving mostly sideways over the past seven sessions, the Forex pair has plunged to its lowest level since September 1 as sellers may have taken low longs by surprise. The graphical diagram also suggests that some major players may have pulled a large bid, triggering the downward spike.
At 02:51 GMT, the USD / JPY is trading 105.654, down 0.079 or -0.07%.
Dollar weakens as risk appetite increases
Traders also said the US dollar fell against the Japanese yen as hopes of a COVID-19 vaccine and large corporate transactions improved investor appetite for risk. This only makes sense if you think that the US dollar was the safe haven asset of choice during the recent two-week decline in the stock market.
Under normal conditions, when the Japanese yen is treated as a carry currency, it will fall when stocks go up or when investors demand risk. And it will rise when stocks fall or investors want protection. But we don’t know normal trading or investing conditions during the pandemic, so we need to analyze the movements a little more closely.
On Monday, a report revealing that AstraZeneca has resumed UK clinical trials of its COVID-19 vaccine, one of the most advanced in development, Pfizer Inc and BioNTech SE proposed to expand their phase 3 COVID-19 vaccine trial .
What’s more, Wall Street stocks also rebounded as several multi-billion dollar deals – including Nvidia’s purchase of chip designer Arm and a deal between Oracle and China’s ByteDance on TikTok – raised confidence.
Japan Economic data
Japan’s industrial production rose more than expected in July, according to final data from the Ministry of Economy, Trade and Industry on Monday.
Industrial production rose 8.7% per month, seasonally adjusted, in July. In the original estimate, production increased 8.0 percent.
On an annual basis, industrial production fell 15.5 percent in July against an estimate calling for a decline of 16.1 percent.
The activity of the tertiary industry fell by 0.5% in July. On an annual basis, tertiary activity decreased by 9.4% in July.
Once again, risk sentiment will guide price action on Tuesday, but not in the usual way. Traders will also have the opportunity to react to the latest US data on import prices, capacity utilization and industrial production. The Empire State Manufacturing Index is also expected to be released.
Meanwhile, the Fed begins its two-day policy meeting and the Bank of Japan begins to prepare for its meeting on Thursday.