Weak JPY, a chance for a dollar
The Japanese government has reduced its economic assessment, stating that the coronavirus pandemic continues to have a major impact on consumption and business conditions. In a monthly report released yesterday, the cabinet said the Japanese economy shows weaknesses in some components. However, it continues to grow despite the difficult situation due to the new coronavirus.
The government said that private consumption has been showing weaknesses lately, thus lowering its view on household consumption, especially in the consumption of services. The government has also downgraded its view of business conditions, saying current business conditions appear to have slowed and need some incentive to grow, while some serious aspects remain. The report says the business investment is accelerating, and exports continue to grow moderately. And it is positive that industrial production is growing.
Regarding the short-term outlook, it was noted that the economy is expected to show movement, supported by policy effects and improvements in overseas economies. At the same time, socio-economic activities will be continued by measures to prevent the spread of infectious diseases. Federal Reserve officials confirm that the upcoming meetings may narrow the debate and will not react until the end of 2021 – the Fed will stick to its patient scenario, which could negatively affect the US dollar index.
Following the chart on the four-hour time frame, we are still above the trend support line, with current support for moving averages from below. We are now waiting for a break above the 50.0% Fibonacci level at 109,220 to climb to the 61.8% level at 109,630 and visit the previous resistance zone. In contrast, a break below the bottom line is likely to lead the dollar in the zone of about 23.6% to 108,290. Looking at the MCAD indicator, we have a bullish signal, and based on it; we expect a further continuation of this smaller bullish trend.
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