Japanese Yen, Anti-Risk, Wall Street, Coronavirus, Q3 Outlook – TALKING POINTS

The Japanese Yen, known for its anti-risk trading dynamics, heads into the third quarter closely glued to broader market sentiment. On the chart below is my majors-based JPY index overlaid with my Wall Street index. Generally speaking, the two tend to have an inverse relationship.

As central banks around the world maintain a dovish tone to support economic growth hindered by the coronavirus outbreak, JPY is left potentially vulnerable as the Dow Jones, S&P 500 and Nasdaq Composite continue finding upside momentum.

Fiscal policy is more uncertain, especially as a gradual recovery from Covid-19 may reduce the urgency for more support and reintroduce political hurdles. Just this past week, the Democrat-lead US House of Representatives passed a US$1.5 trillion infrastructure package that is likely to be vetoed by President Donald Trump.

Delays to much-needed support could reintroduce volatility, opening the door to swift Yen appreciation. This is as US coronavirus cases rise at record daily amounts as of late and certain states take measures to reverse or halt lockdown-easing measures. Ahead, Canada’s jobs report will further inform global growth expectations.

Japanese Yen Versus Wall Street – Daily Chart

Japanese Yen Forecast

Chart Created Using TradingView

*Majors-Based Japanese Yen Index Averages JPY vs: USD, AUD, GBP and EUR

*Wall Street Index Averages S&P 500 Futures, Dow Jones Futures and Nasdaq 100 Futures

— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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