Japanese Yen, US Dollar May Gap Higher as Week Starts on Virus Fears

Japanese Yen, US Dollar, Crude Oil, S&P 500, Coronavirus – Asia Pacific Market Open

  • Japanese Yen and US Dollar may gap higher as week begins
  • China reported more cases of the coronavirus after U.S. close
  • Illiquidity is likely to be exacerbated by the Lunar New Year

Japanese Yen Gains on Coronavirus Fears as Euro Weakens After ECB

The anti-risk Japanese Yen and haven-linked US Dollar were the best-performing major currencies on Friday and may gap higher as the new week begins. The S&P 500 closed 0.90 percent to the downside in its worst week since the middle of August. Sentiment-linked WTI crude oil prices followed, plunging about 2.5% as worries about the coronavirus spread into financial markets.

A third report of a person from the United States being diagnosed of the Wuhan virus fueled contagion fears. Europe’s first case was also reported in France. The concern for financial markets is that should citizens opt to stay home, particularly in China during the Lunar New Year holiday, it can dent revenue and hurt productivity. US Treasury prices generally rose, indicating a premium for safety.

Anti-fiat gold prices rallied, though a stronger Greenback likely depressed some of the precious metal’s full potential. There was a cautious pullback from the “pro-risk” Australian Dollar and New Zealand Dollar. Better-than-expected UK Markit Manufacturing PMI data temporarily lifted the British Pound, but it ultimately aimed lower against the US Dollar as the session prolonged.

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Monday’s Asia Pacific Trading Session – Japanese Yen, US Dollar, S&P 500 Futures

With that in mind, Asia Pacific benchmark stock indexes may follow Wall Street lower at the onset of Monday trade. Chinese markets are offline for the Lunar New Year until the end of this week, exacerbating illiquidity. That could spell trouble if virus contagion fears pick up pace, likely pushing the Yen and US Dollar higher. China confirmed an additional 444 cases of the coronavirus after U.S. markets closed for the weekend.

Japanese Yen Technical Analysis

My majors-based Japanese Yen index closed at its highest in over 2 weeks on Friday, taking out a medium-term falling trend line from August. This index is an average value of the Yen against its most-liquid major counterparts. Upside follow-through could spell the beginning of prolonged strength on average in the JPY, perhaps sending AUD/JPY, GBP/JPY and EUR/JPY further to the downside.

JPY Forecast

JPY Forecast

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Majors-Based Japanese Yen Index

Japanese Yen, US Dollar May Gap Higher as Week Starts on Virus Fears

Chart Created Using TradingView

— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter


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