[DAILY NOTION] FXEMPIRE - USD/JPY Forecast - Oct 26, 2020

The Dollar/Yen closed sharply lower last week as real interest rates fell in the United States relative to Japanese Government debt, making the yen a more desirable asset.

U.S. coronavirus aid headlines also drove the price action with most traders pricing in stimulus. Whether is comes before or after the election doesn’t seem to matter to investors at this point.

Japan Economic Updates

Japan’s exports fell 4.9% in September from a year earlier, Ministry of Finance data showed on Monday, dropping at a slower pace than in the previous month as pressure from the coronavirus pandemic eases.

That compared with a 2.4% decline expected by economists in a Reuters poll and followed a 14.8% fall in August.

National Core CPI came in better than expected at -0.3%. Traders were looking for -0.4%.

Last week, the USD/JPY settled at 104.703, down 0.702 or -0.67%.

Finally, Japan’s factory activity extended declines in October, a private sector survey showed on Friday, highlighting the impact a resurgence in global coronavirus infections has had on the world’s third-largest economy.

What's Next?

Progress toward a stimulus deal should put further pressure on the USD/JPY this week, but the focus is likely to shift toward the November 3 presidential election.

A Biden victory, which polls predict, will probably drive further dollar weakness, because he is expected to spend more on coronavirus aid than Trump.

On Wednesday, the Bank of Japan will release its Outlook Report and Monetary Policy Statement.

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