Source: IG Charts
Japanese Yen Forecast: Bullish
- Anti-risk Japanese Yen[1] gained on Friday as Nasdaq[2] 100 sank
- US fiscal stimulus stalemate, China tensions may boost JPY
- Eyes turn to University of Michigan sentiment at end of week
The anti-risk Japanese Yen heads into what could be an interesting week following the shift in market sentiment on Friday as the tech-heavy Nasdaq 100 underperformed the Dow Jones[3] and S&P 500[4]. This is despite a broadly optimistic US non-farm payrolls report[5] as the nation added over 1.7 million employees. Other more-pressing developments overshadowed the jobs data given that markets are forward looking.
These include escalating US-China tensions and a stalemate between Democrats and Republicans over the next fiscal package. If these allude to risk aversion in the week ahead, then the Yen could receive a bid as it tends to inversely track global stock markets – see chart below. On the other hand, bold efforts from central banks globally to lubricate financial markets could limit downside potential for equities.
The White House moved to attack Chinese tech companies, prohibiting transactions related to WeChat and TikTok on the grounds of national security risks. Tencent, the owner of WeChat and China’s most valuable tech company, saw its share price temporarily decline as much as 10% before trimming losses. The US also sanctioned 11 Chinese officials, including Hong Kong’s Chief Executive Carrie Lam.
This was in response to “Beijing’s policies of suppression of freedom and democratic processes,” following China’s implementation of the imposed national security law in HK[6] earlier this year. Retaliation from China down the road could further sour market mood, likely boosting the Yen, particularly against cycle-sensitive currencies such as the
