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Anti-risk sentiment in the currency market continues to grow, but the Japanese currency ignores these trends. This time, the yen can not take advantage of the status of a protective asset, as traders are concerned about the fate of the Japanese economy directly due to the latest decisions of the official Tokyo. Therefore, investors have to look for other options in this situation. In fact, they don't have much of a choice: either the dollar or gold. These two assets are growing today, while the other instruments show a downward trend.
Rumors that Japan will introduce a state of emergency appeared at the end of last week. Reacting to such assumptions, the USD/JPY pair pushed off from the local minimum of 106.93 and headed back up towards the 110th figure. After the publication of the failed non-farms, this growth increased – despite everything, the dollar not only did not lose its position, but also strengthened throughout the market. Traders were clearly discouraged by the published figures, which turned out to be much worse than the rather weak forecasts. No joke – the number of people employed in the non-agricultural sector decreased in March by 700,000. The same dynamics was recorded in the private sector of the economy (-714,000). The unemployment rate came out at 4.4%, but this indicator refers to lagging economic indicators – according to experts, the real unemployment rate is now in the region of 10 percent. Such figures provoked an increase in anti-risk sentiment, after which traders began to buy the US currency in droves, using it as the most reliable protective asset.
But the yen, on the contrary, increased its fall, including in a pair with the dollar. The fact is that Japan in the near future can largely repeat the path of the Americans with all the consequences that follow from this. Let me remind you that at the end of last month, Japanese lawmakers approved a law that allows the Prime Minister to declare an emergency in the country in connection with the Covid-19 epidemic. Now, if necessary, Shinzo Abe can order to declare a state of emergency in the entire country and in certain regions. In the second case, municipalities will get additional powers – in particular, they will be able to require local residents not to leave their homes, as well as temporarily use private land and premises for medical services. If the Japanese refuse to provide the required facilities for use, the local authorities have the right to confiscate them. And what is especially important (in the context of the currency market) – regional governors will be able to close enterprises and factories.
Today, the rumors were confirmed: the Prime Minister of Japan during his press conference said that he intends to declare an emergency starting from April 7. Not in the whole country, but in many prefectures. The state of emergency will be introduced in the capital – Tokyo, neighboring prefectures of Kanagwa, Chiba, Saitama, as well as the prefectures of Osaka, Hyogo and Fukuoka. The Prime Minister promised that he would not close cities (as many countries do), but would insist that people stay at home. At the moment, it is difficult to assess how large-scale the consequences of this step will be. But at the same time, it is obvious that the unemployment rate will increase in the country and the volume of industrial production will decrease. And this is despite the fact that the epidemic in Japan, according to experts, has not yet reached its peak.
At the moment, more than 4,600 people infected with the coronavirus have been identified in the country, and 106 people have died. These numbers are relatively low (compared to those States that are at the epicenter of the pandemic), but the number of new cases continues to grow steadily, especially in the capital. At the moment, it is known that the heads of the above-mentioned regions of the country "strongly recommend" to suspend the activities of enterprises, factories and organizations, as well as the work of institutions where a lot of people gather. The adopted law allows you to extend this regime for up to six months, that is, until October of this year.
Such prospects put pressure on the Japanese currency. The USD/JPY pair is growing for the third trading day in a row and today it has already tested the 109th figure – however, it bounced from the resistance level of 109.30 (the Tenkan-sen line on the daily chart). But if anti-risk sentiment continues to prevail in the market, the pair will probably break through the specified resistance level and head towards the next two price barriers – 109.30 and 109.60 (the lower and upper border of the Kumo cloud, respectively), with a further aim at the 110th figure. Therefore, it is now advisable to consider long positions for the pair to the specified price targets.
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