The Dollar/Yen is trading higher early Tuesday as the safe-haven buying continues despite some early strength in the global equity markets. The price action suggests investors are starting to hedge their bets against the failure of the newly proposed Democratic fiscal stimulus package and in anticipation of volatility with the Presidential debates scheduled for Tuesday evening.
At 07:45 GMT, the USD/JPY is trading 105.553, up 0.046 or +0.04%.
Technical factors are also influencing the trade with the Forex pair testing a key 50% to 61.8% retracement zone at 105.526 to 105.885. Trader reaction to this zone should determine the near-term direction of the USD/JPY.
It should be noted that although traders took out the previous high at 105.701, it was only by 0.007. This may not actually represent real buying, but rather weak buy stops. Basically, keep an eye on trader reaction to the 50% level at 105.526. This price has been straddled the last three sessions so I think trader reaction to this level will set the tone.
Japan Economic News
Tokyo Core CPI came in at -0.2%, better than the -0.3% forecast and previous read. The Bank of Japan (BOJ) also released its Summary of Opinions.
Earlier in the session, Reuters reported that core consumer prices in Tokyo fell 0.2 percent in September from a year earlier, government data showed on Tuesday.
The core consumer price index for Japan’s capital, which includes oil products but excludes fresh food prices, compared with economists’ median estimate for a 0.3 percent annual fall.
Some in BOJ Called for Review of Policy Strategy – September Meeting Summary
Some Bank of Japan board members called for a review of the central bank’s policy strategy as the economic shock caused by the coronavirus pandemic pushes inflation further away from its target, a summary of opinions from a September meeting showed.
Those views underline the increasingly tough position the BOJ finds itself in, as inflation had failed to gain momentum even before the coronavirus ravaged Japan’s economy.
A few board members said the central bank may need to find a new approach to fire up inflation toward its 2% target, given the pandemic’s sweeping impact on companies and households.
“As economic developments change rapidly, it’s becoming hard to foresee inflation reaching our target. It’s thus necessary to conduct again a comprehensive examination of our strategy for achieving the price goal,” one board member was quoted as saying in the summary released on Tuesday.
“We may need to debate the appropriate monetary policy path from the perspective of how to balance the need to contain the pandemic and keep the economy alive,” according to another opinion shown in the summary.
Some others said the BOJ must act “promptly” and in close cooperation with the government if the pandemic’s scars deepen, according to the summary released on Tuesday.
The BOJ kept policy steady in September and offered a slightly more upbeat view of the economy than in July, suggesting that no immediate expansion of stimulus was needed.
But BOJ Governor Haruhiko Kuroda has said the central bank would work closely with new Prime Minister Yoshihide Suga’s administration to shield the economy from the broadening fallout of the pandemic, including by loosening policy further.
The BOJ releases a summary of opinions voiced by its board member roughly a week after its rate review. It does not disclose the identity of the members who voiced the views.
BOJ Summary of Opinions aside, the near-term price action is going to be determined by trader appetite for risk with coronavirus fears, U.S. fiscal stimulus and the Presidential debates the key catalysts behind the next move.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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