Japanese Yen, S&P 500, US Dollar, Australian Dollar, RBA – Asia Pacific Market Open
- Japanese Yen fell, markets may have bet on Abenomics continuation
- US Dollar declined despite broad weakness in global stock markets
- Australian Dollar eyeing RBA, JPY could be at risk to further losses
The anti-risk Japanese Yen was the worst-performing major currency over the past 24 hours. This is despite weakness in most stock sectors during the Wall Street trading session. The Dow Jones Industrial Average and S&P 500 closed -0.78% and -0.22% on Monday while the tech-heavy Nasdaq 100 managed to clock in a 0.68% increase.
Weakness in the Yen may have been as a consequence from the end of last week when Japanese Prime Minister Shinzo Abe resigned for health reasons. The markets may be betting on Abe’s successor to continue his ‘Abenomics’ stimulus plan. The Nikkei 225 outperformed its APAC peers on Monday.
Despite losses in the majority of stocks on Monday, the haven-linked US Dollar also aimed slightly lower. The Greenback was falling alongside longer-dated Treasury yields. Fed Vice Chair Richard Clarida noted earlier that ‘there potentially is a place for yield-curve control’. Falling returns in government bonds may have contributed to the lackluster performance in USD.
Tuesday’s Asia Pacific Trading Session
With that in mind, the focus for the anti-risk Yen could start to shift back to the dynamics in market sentiment. A disappointing session for APAC equities ahead could help alleviate recent selling pressure in the JPY and USD. Conversely, the growth-linked Australian and New Zealand Dollars could stand to depreciate.
AUD/USD will also be eyeing the Reserve Bank of Australia (RBA) rate decision. Economists are expecting the cash rate and 3-year yield target to remain unchanged at 0.25%. What could raise volatility risk in the Australian Dollar are concerns policymakers have about the economic impact of lockdowns in the state of Victoria.
Japanese Yen Technical Analysis
The Japanese Yen could be at risk to extending losses. On the daily chart below, my majors-based Yen index just broke under a bearish Descending Triangle chart pattern – as expected. A confirmatory downside close could spark further selling pressure as the Yen looks to test its average cheapest price since December 2019.
Majors-Based Yen Index – Daily Chart
*Majors-Based Japanese Yen Index Averages JPY Against USD, AUD, GBP and EUR
--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter