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USD/JPY forecast for 26.06.2020

May 26, 2020

May 26, 2020

The corridor is too narrow for the yenDmitri Demidenko

Will the USD/JPY go outside the trading range of 106-109?

When people go outside, and the lockdown is in the past, the yen seems to face problems. An increase in the global risk appetite amid the reopening of the global economies and the hopes for the global GDP rebound, the demand of Japan’s investors for overseas securities also grows. This forces the capitals to go from Japan to the USA and Europe, the [USD/JPY][1] and [EUR/JPY][2] start rising. This is usually so, but not this time. The U.S. dollar has stuck in the trading range of ¥106-¥109 since late March and will hardly exit it soon.

In theory, the lowest Shinzo Abe’s poll ratings since taking up his second spell in office in 2012, mass protests in Hong Kong, the US-China trade conflict, and the concerns about the second wave of COVID-19 should support the high demand for safe havens, including the Japanese yen. In fact, I don’t believe that any of the yen’s advantages are no longer relevant. Japan’s Prime Minister has many times proved to be effective. Donald Trump’s criticism of China also has its limits. If the US President goes too far, the US economy will suffer, which is the least desired ahead of the elections. The risks of a new wave of the pandemic are compensated with the news about developing coronavirus medicines and vaccines.

However, the major reason for the [USD/JPY][1] trading flat is a change in the US dollar’s status. Before the Fed had cut the interest rate from 1.75% to 0.25% in March, it could be called one of the riskiest G-10 currencies. The Treasury yields were higher than that of their world’s peers, and the greenback’s growth following the US stocks’ rally used to be a norm before the pandemic. The USD/JPY was moving in sync with the S&P 500, and the reason for this was the willingness of Japan’s investors to buy more profitable US assets.

Since late March, everything has radically changed. The US stocks’ rally pressed the [USD/JPY][1] down and vice versa. The situation has stabilized in May, which has sent the pair into the consolidation range of 106-109.

Dynamics of USD/JPY and S &P 500

![LiteForex: USD/JPY forecast for 26.06.2020][3]

Source: Trading Economics.

What’s next? I believe both the dollar and the yen have their flaws. It suggests, at best, the widening of the trading corridor, but not the real trend. The expansion of the Fed’s balance, too fast growth of debts, the US twin deficit (budget and foreign trade) are the bearish factors for the greenback. The yen, however, will be pressed down by the capital outflow from Japan to the USA and Europe. As a result, it makes sense to sell if the [USD/JPY][1] goes up towards the top of the consolidation range of 106-110 defined in[ mid-April][4]. Also, traders have a good chance to make a double-bank shot. You can make profits and win a dream house, a brand new car and other prizes the [LiteForex Dream Draw][5] devoted to its 15th anniversary.

I also consider the idea to buy the [EUR/JPY][2], the [AUD/JPY][6], and the [NZD/JPY][7] with targets at 121, 74.75-74.95 and 70.2-70.55 if the Chinese economic rebound is V-shaped, and there is not a new round of the US-China trade war.

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Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

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Price chart of USDJPY in real time mode

![The corridor is too narrow for the yen][10]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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