How far the prospects for USD/JPY may be downward

The dynamics of the USD/JPY currency pair  remains a certain indicator of market risks to a large extent. It slowed down in the face of declining trade tensions and the risks of a global recession. But, despite the decline in the overall level of pessimism in the market, the actual risks remain significant. Especially in the conditions of the total course stimulating the economy of the world Central banks.

The currency pair US dollar Japanese yen is trading in a steady downtrend starting from the end of this April. Having shown a slowdown in the decline in July, but more than compensating for the decline in early August. What contributed to the fundamental factors in the face of the threat of new duties from the United States on Chinese goods.

The current dynamics of the USD/JPY pair is more like a restrained correction after the decline in early August, which corresponds to the general dynamics, but is more significant than the market wanted. As a result, a certain side triangle is formed on the market.

The growth of this pair is limited by significant resistance levels: 106.70, 107.20 and 107.70. The fundamental factors indicating the continued preservation of a downtrend and limiting growth are:

• The persistence of a trade war between the United States and China, which could erupt with renewed vigor after another failure of negotiations.
• Weak global economic growth and actual signs of recession.
• The policy of world Central Banks aimed at lowering key rates and stimulating the economy.

All this retains the potential to weaken the USD/JPY pair  in the near future. Not only to the August lows of the current year at 105.00, but also to a more significant decrease to the levels: 104.50, 104.00 and 103.50.

Technically, the dynamics of USD/JPY depends on the results of the movement in flat, or rather, on the formation of a reversal pattern with a decrease or continuation with growth. The trading range of the flat and the zone of uncertainty ranged from 106.70-90 to 106.00-105.70. A breakdown of these levels in one direction will be a signal to continue the movement.

Fundamental factors lead the pair to decline. The reason for the slowdown may be a reduction in existing risks and, as an option, more rapid measures to stimulate the economy by the Bank of Japan.

Anton Hanzenko