Despite the correction that took place earlier in September, the Japanese Yen is again strengthening against the USD. The reason is media coverage and investors’ growing needs for “safe haven” assets.

Geopolitical situation in Asia is slowly aggravating. There were some comments from North Korea last weekend, which didn’t attract investors’ attention, but the ones expressed on Monday really made the market nervous. North Korean Ministry of Foreign Affairs perceived Donald Trump’s words as the declaration of war. And since the USA has declared a war, North Korean authorities believe that they have every right to accept the challenge. From their point of view, from now on North Korea has the right to shoot down any American strategic aircraft within sight on the Korean territory or even out of sight.

And really, there are some American aircrafts flying not so far after all. Last weekend, they reported on several B-1Bs rather close to the eastern coast of North Korea.

At the same time, we should note that there might be no real military operations: words are words, aggression is aggression, but the very first thoughtless step will cause an entire chain of disastrous consequences, which will be very difficult to settle through peaceful means. This idea can be easily seen in the behavior of the USD/JPY pair: the instrument would return to its highs, unless investors thought otherwise.

At the moment, this is one of the main things that influence the Yen movement. The Japanese fundamental background and news are looking pretty calm during the last September week. The Department of Economic Affairs of Japan says that the country has to work on increasing its economic potential. Japanese authorities would like to see budget surplus in 2018 and say that they’re not going to change the sales tax so far, because the country’s economy requires some time to become more stable.

If we take a look at the daily chart of the USD/JPY pair, we can see that right now the price is moving inside the descending channel, but is getting closer to the upside border to test or even break it. The key resistance level is close to 113.00. If the instrument breaks it and fixes above, the pair may continue growing to reach the psychologically-crucial level at 120.00. However, this is the mid-term scenario.

USD/JPY daily

The short-term outlook can be better seen at the H1 chart. Here we can see that the pair has finished the ascending impulse and started a new correction with the closest target at 111.35, which is the downside border of the descending channel. The next possible target of this descending movement is close to 110.30. To resume the uptrend, the instrument has to break the resistance level at 112.30. In this case, the price may grow towards its mid-term targets, 113.25 in particular.


Author: Dmitriy Gurkovskiy, senior analyst at RoboForex

Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

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