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The Japanese currency, a model of equanimity and samurai resilience, is ready to challenge the stock market, in particular the bulls on the USD/JPY pair. Currency strategists at Citi believe that the yen will test its July lows in the near future.
Experts of most large banks predict a steady decline in the Japanese currency against the dollar. Citi believes that the USD/JPY pair is ready to renew last month's low at 104.18. Over the past three days, experts have recorded a sagging yen and unsuccessful attempts to storm the 55-day moving average. By the middle of this week, the short-term support level of 106.47 was broken, which was a blow for the "bulls" on the USD/JPY pair. Buyers' disappointment peaked amid increasing negative "bearish" trends.
Citi analysts consider the most preferable sale of the USD/JPY pair when trying to rise. This knocks the ground out from under the feet of buyers, depriving them of profits and forcing them to reconsider previous strategies. The bulls are concerned about the strengthening of the downward trend in the USD/JPY pair. According to Barclays experts, the pair is able to slip into an extremely low range of about $100. In the event of such a scenario, the dollar will receive support from Japanese life insurers who hedge their investments in foreign bonds.
Barclays believes that the movement of the USD/JPY pair towards $ 100 may attract buyers, which will give odds to the "bulls" for some time. This will be a short-term respite for them, since it is too early to celebrate victory. The bank's specialists do not exclude the collapse of the USD/JPY pair to $ 104 by the end of this year. Attempts to enter a downward spiral are already being recorded, when the pair is balancing on the verge of another declinel. On Wednesday, August 19, the USD/JPY pair was trading in the range of 105.52-105.53, moving slowly towards the decline.
Meanwhile, analysts at Credit Agricole are more optimistic about the Japanese currency. The bank is confident that the fall of the dollar to the yen below $ 105 will be temporary. The likelihood of such a scenario increases if Joe Biden, the candidate from the US Democratic Party, wins the presidential election. Experts consider the level of $ 105 to be key for the yen, as it has served as support for the USD/JPY pair for a long time and has not been broken since 2017. At the moment, the USD/JPY pair does not leave the range of $106 - $107. The Japanese currency is supported by national insurers actively hedging investments in foreign bonds, while the US currency is supported by concerns about political disagreements between the United States and China. Against this background, investors seek to avoid risk by purchasing the currency of the Land of the Rising Sun.
According to experts, the yen has a high chance of ending August at minimum levels. By the beginning of autumn, the Japanese currency will approach in a slightly relaxed mood, but this ease is deceptive. The yen is able to instantly gather its strength, like a tiger before a jump, and begin to storm the highs again, rushing to the range of $107 - $108. Many experts assume that this is the development of events in the coming months.
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