The dollar/yen pair updated the lows of the current month during the Asian session on Friday, falling to the 106th figure. On the one hand, the pair is still trading in the flat band of 106.80-107.90, within which it has been since the beginning of June. On the other hand, the growth of the Japanese currency indicates an increase in anti-risk sentiment in the currency market, since the yen does not have its own arguments to strengthen.
It is obvious that the coronavirus is the main cause of concern for traders. The issue of COVID-19 became secondary in June (in the context of the reaction of financial markets), as despite the ongoing pandemic, the authorities of the world's largest countries relaxed quarantine restrictions and restarted economic processes. In addition, many businesses received support from the authorities and central banks. In other words, the market stopped paying attention to coronavirus for a while, focusing on recovery processes in key countries of the world.
But the latest figures have forced traders to rethink their priorities. And if the United States was the only hot spot over the past two or three weeks (this is why the US dollar suffered), then yesterday the Bank of Japan sounded the alarm about global trends.
The world set a new anti-record for the number of coronavirus infections yesterday. Over the past 24 hours, 222,825 infections were diagnosed in all monitored countries, and 5,404 patients died. In the United States alone, 61,067 cases of coronavirus were diagnosed over the past 24 hours. The figures are as follows: 42,907 in Brazil, 25,790 in India, 13,674 in South Africa, and 6,509 in Russia. In total, cases of infection were registered in 148 countries around the world.
The head of the World Health Organization, Tedros Adhanom Ghebreyesus, commented on the situation. According to him, the spread of the coronavirus pandemic is "still accelerating", and most countries have not yet managed to control it. Anthony Fauci, the head of the US National Institute of Allergy and Infectious diseases, added fuel to the fire, saying that the world is "at the very beginning" of a pandemic. He stated that the rate of infection is accelerating, and the countries of the world must again take the necessary measures to contain it. The virologist reiterated that the United States was not the only one that failed to bring the pandemic under control – large outbreaks are recorded in Brazil, South Africa and Asia.
It is worth noting that some countries are now forced to tighten quarantine restrictions again, although in most cases we are talking about local solutions. For example, the state of Victoria was "closed" in Australia. In the United States, southern and western states impose local quarantines, independently determining the scope of restrictive measures. In the European Union, some countries have also decided to delay easing the quarantine or even return to lockdown. In some cases, such decisions lead to riots – for example, in Serbia, people have been protesting for several days in a row, after learning about the authorities' plans to re-impose a curfew in the capital in connection with the COVID-19 outbreak. Meanwhile, several European cities have imposed local quarantines – in particular, in Germany, in Northern Greece, in Slovenia and in Bulgaria.
Such a news flow suggests that the process of global economic recovery can be paused again. The prospects of a re-lockdown has left the market, after which the yen strengthened its position as a safe-haven. If panic among traders continues to grow, the Japanese currency will be in high demand, determining the downward dynamics of the USD/JPY pair. In addition, traders can massively close previously opened positions on the last trading day so as not to leave them on weekends. Profit taking can increase the pressure on the pair.
If we talk more specifically about price goals, we should consider the technical picture of the pair. A scenario for a decline is clearly emerging here. On the daily chart, the pair is located between the middle and lower lines of the Bollinger Bands indicator (whose lines are also narrowed), which indicates the priority of a bearish movement. The pair is also under the Kumo cloud, and the Ichimoku indicator itself has formed a bearish Parade of Lines signal. The first target for the pair's decline – the 106.60 mark – is the lower line of the Bollinger Bands indicator on the daily chart. The main target of the bears is located below, at the bottom of the 106th figure (local price low of 106.05), the breakout of which will open the way to the 105th figure. But it is too early to talk about this: first, the bears need to finally gain a foothold at the 106th price level, before considering further downward prospects.
