USD/JPY. The rough activity of the Democrats pushes up the US dollar

On the first trading day of the week, the USD/JPY bears again tried to enter the 107th figure, against the backdrop of a surge in anti-risk sentiment in the foreign exchange market. However, sellers could not resist in this price area for several hours: the general strengthening of the dollar pushes the pair up to new local highs.

The dollar index confidently broke through the level of 99 points, currently reaching 99.132 points. The last time the indicator was in this area was back in April 2017 - at a time when the Federal Reserve nearly raised the interest rate at each of its meetings - in total, the regulator increased it from 12% to 1.5% over the 12 months, announcing further steps in this direction. The growth of the US currency in the context of tightening monetary policy is quite understandable, but at the moment the greenback is growing only on emotions, reacting to loud statements by politicians regarding the prospects of the impeachment procedure. The dollar also follows the stock market - the S&P 500 is in the area of record highs, and many experts see this as a sign of the resumption of the bull market.


But still, the main reasons for the growth of the USD/JPY pair are the events of the external fundamental background. The events of recent days eloquently testify to this. So, at the close of the last trading week, shares of Chinese companies collapsed: information appeared in the press that the US authorities were discussing the possibility of delisting (removing company securities from the quotation list) of Chinese companies from their stock exchanges. In addition, according to a published insider, the White House also plans to limit the presence of US pension funds in China's financial market. In response to this insider, shares of such giants as Alibaba, Baidu and JD showed a sharp decline. On Monday, the currency market also responded to these rumors - at the opening of the trading week, the dollar-yen pair corrected to around 107.76, although on Friday the pair closed within the 108th figure.

But during the US session on Monday, the price confidently returned to its previous position. The White House almost immediately commented on the rumors that appeared: according to the representative of the US Treasury Department, the Trump administration "at present" does not consider plans to block the admission of securities of Chinese companies to US stock exchanges. Traders were not confused by the remark that these restrictions were not planned to be introduced "at the moment" - by and large, the official Washington did not refute the very concept of the proposal under discussion.

In addition, the White House did not comment on other possible restrictive measures that journalists spoke about (about restricting the presence of US pension funds in the Chinese financial market). If it were not for the general hysteria over the possible impeachment, the USD/JPY bulls would not have satisfied this answer - traditional defensive tools would still be in demand. But the political factor made its own corrections - thanks to the unfolding political scandal in the US, the dollar sweeps everything in its path, ignoring all other fundamental factors.

As you know, Congress was able to find votes to accept the consideration of the impeachment of President Donald Trump. And although this scenario was quite predictable (the Lower Congressional Board is controlled by the Democrats), this fact caused almost panic among traders. Partly due to the fact that initially the initiators of the vote did not have enough votes (210 out of the necessary 218). But still, representatives of the Democratic Party were able to consolidate their efforts and launch the appropriate procedure.

Now the relevant committees of the House of Representatives (which are again controlled by the Democrats) are conducting an investigation, summoning Trump administration officials and officials of other departments to Congress to give explanations. In other words, opponents of the Republicans do not waste time, using the political platform that they were provided "to the fullest." All these events support the dollar, as investors see it as a safe haven in a period of heightened uncertainty. It is noteworthy that the remaining safe haven currencies, which include the yen, continue to lose their positions. The dynamics of the USD/JPY pair most clearly demonstrates the general state of affairs in the foreign exchange market.


But here it is worth recalling again that if, following the results of the investigation, the House of Representatives votes for impeachment, then the Senate will consider this issue further. In order to remove the president from office (which has not yet happened in US history) two-thirds of senators must vote for this. According to the results of the midterm elections, the Senate is controlled by Republicans, who in 2020 will also go to the polls with their leader. According to many political analysts, they will not play "giveaways" with their competitors, especially against the background of sufficiently "strained" accusations. Moreover, representatives of the Republican Party launched a counterattack - in particular, they demand that the Minister of Justice and Attorney General William Barr investigate the ties between the Ukrainian authorities and the Hillary Clinton headquarters during the 2016 presidential election.

Thus, the political epic with the "dismissal" of Donald Trump provides significant support to the US currency. Given the fact that the scandal is not abating, the dollar index continues to go up, reflecting the demand for greenbacks throughout the market. The yen can not oppose the dollar - traditional defensive instruments (including franc and gold) also lose their position, giving way to a rally of the US currency. It is difficult to say at what stage the political scandal will lose its force. The House of Representatives can indeed pass the indictment to the Senate (given the political pressure of the Democrats), but the future prospects for impeachment still look vague, especially against the backdrop of active Republican actions of a defensive nature.


In other words, the USD/JPY pair maintains its growth potential towards the middle of the 109th figure, namely, at 109.50, where the lower boundary of the Kumo cloud coincides with the upper line of the Bollinger Bands indicator on the weekly chart. The intermediate (nearest) upward target is the level of 108.80 (also the upper line of the Bollinger Bands indicator, but already on the daily chart).

The material has been provided by InstaForex Company -