USD/JPY looks through US protests to focus on Blue Sweep

In an article on Monday, the challenges facing traders this week were outlined including the Electoral College vote where supporters of outgoing President Donald Trump were expected to mount a last-ditch challenge to overturn the November US Presidential election result.


In a continuation of the trend that was 2020, the previously unthinkable has unfolded as supporters of outgoing US President Donald Trump broke into the US Capitol Building, while Congress was in session, forcing evacuations and resulting in one fatality.  

Images of the ultimate symbol of American democracy under siege have prompted world leaders to call for calm and a “peaceful and orderly transfer of power”. The hope now is that the final chapter of a contentious US election will soon be closed by Joe Biden's formal confirmation.   

For traders, this would mean they can go about the business of repricing asset classes following the surprise win by the Democrats in the Georgia Senate runoff, which gives the Democrats control of both chambers of Congress.

The delayed Democratic “Blue Sweep” increases prospects of further fiscal stimulus and limited tax increases, and prompted US 10 year yields to close 8bps higher overnight - back above 1% for the first time since mid-March 2020.

The rally in US yields has provided some relief to USD/JPY that has spent the last nine months trading within a downtrend from the 111.72 March 2020 high. Despite the dominant downtrend the value in trading USD/JPY from the short side at current levels, ahead of very strong weekly support 102.00/101.00 area appears limited.

Rather after the formation of a potential double low this week at 102.59 and supported by the rally in U.S yields, there appears to be scope for USD/JPY to rally towards recent highs 103.70/90 area in line with the chart below.

USD/JPY looks through US protests to focus on Blue Sweep

If US 10 year yields were to continue higher again into the 1.10/1.15% region, it would then open the way for USD/JPY to push towards the band of resistance 104.30/82, coming from trend channel resistance (104.30) and the 200-day moving average (104.82).

USD/JPY looks through US protests to focus on Blue Sweep

Source Tradingview. The figures stated areas of the 30th of December 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.