Concerns about the global economic slowdown due to the negative impact of the coronavirus still influence investors to tend to choose the yen as a safe-haven asset rather than the United States dollar (US).
Global Kapital Investama analyst Alwi Assegaf said the US dollar was likely to weaken before the yen because, amid the pressure of the coronavirus, investors were likely to turn to the yen as a safe-haven asset.
Coronavirus outbreaks that are increasingly spreading to various market countries are worried that they can disrupt global supply chains and disrupt global trade. This could lead to the weakening of global economic growth.
Therefore, to ward off the global economic slowdown, the central bank will tend to cut its benchmark interest rates, including the Fed. "Expectations of interest rate cuts by the Fed as an effort to save the US economy from the recession due to the coronavirus weakened the US dollar," Alwi said, Thursday (2/27).
USD / JPY Corrected, After Strengthening Quite Significant
Increasing the possibility of the Fed lowering its benchmark interest rate also makes the US Treasury yields to move down and reduce investor interest in holding the US dollar. "Amidst the threat of weakening global economic growth that could lead to a recession, investors are looking more at the yen as a safe-haven asset," Alwi said.
Alwi projects the weakening of the US dollar will still occur in trading on Friday (28/2). Alwi technically analyzed the RSI indicator at level 48 where the seller's position dominates. MACD indicator although in a positive area but has shown a bearish divergent pattern. The price is moving below the 10 MA. Stochastic shows a bearish cross over the signal.
After having strengthened significantly since the beginning of the week, the USD / JPY currency pair had to close corrected in the last trading this week. Launch of Bloomberg, Friday (21/2), the movement of USD / JPY closed corrected 0.44% to 111.61 levels.
However, Global Kapital Investama analyst Alwi Assegaf said the USD / JPY remained in a bullish trend driven by market concerns about the coronavirus (Covid-19) which made investors turn to safe assets.
"As long as the market is still overshadowed by fears of the virus, safe-haven assets will be hunted. However, this time the prestige of the safe-haven yen is fading amid fears that the coronavirus could hit the Japanese economy, "he explained to Kontan.co.id, Sunday (2/23).
The US Dollar is Estimated to Still be Able to Grow
The trend of strengthening of the USD against Asian currencies itself is a reflection of market expectations that a slowdown in the Chinese economy will hit countries like Japan, Indonesia, and Thailand greater than other countries.
Even the coronavirus has spread to Japan. Based on data from Agence France-Presse (AFP), in Japan alone as of last Friday, there were 717 cases of the coronavirus with two of them declared dead on Thursday.
"The virus has also contracted growth in Japan. Japan's GDP in the fourth quarter of 2019 contracted 1.6%, greater than the estimated contraction of 1%, "he explained.
Poor Japanese economic data plus the spread of the coronavirus are inversely proportional to the United States (US) economic data. US GDP is projected to still grow by 2% with data on the labor sector that is still solid. Recent data showed the Philly Fed manufacturing index rose to a three-year high to 36.12 in February from 17 January.
From a technical perspective, prices are still moving above the moving averages 20 and 55, suggesting the trend is still bullish. The MACD indicator is still in a positive area. But the stochastic and RSI indicators are starting to overbought, allowing the price to be corrected before continuing the upward trend.
