Investors increased their buying interest in the Japanese yen recently as a safe haven amid the increasing numbers of coronavirus deaths and infections in the United States, which currently exceeded the numbers in countries suffering from the epidemic for months. The USD/JPY pair fell at the beginning of this week's trading to the 107.12 support before settling around the 108.30 level at the time of writing. These frightening numbers may increase the closings of the American economy, and thus increase pressure on the Federal Reserve Bank and the US government, which approved an emergency plan to stimulate the largest economy in the world with a value of 2 trillion dollars.
On the economic side. Referring to the strong US housing market ahead of the shutdown caused by the Coronavirus outbreak, the National Association of Realtors, “NAR”, released a report on Monday showing an unexpected jump in pending home sales in February. NAR said that the Pending Home Sales Index rose 2.4 percent to 111.5 in February after rising 5.3 percent to 108.9, revised up in January. The continuous increase surprised economists who expected pending home sales to decline by 1.0 percent.
Selling a suspended home is the procedure in which the contract has been signed but has not yet been closed. Usually, it takes four to six weeks to finish a contract sale.
However, NAR Chief Economist Lawrence Yoon noted that the latest data did not cover major ramifications from the coronavirus shock or measures taken to control the outbreak. "The numbers in the coming weeks will show how difficult the housing market is, but I'm optimistic that the upcoming stimulus package will reduce economic damage and we may get a strong V-shaped recovery later in the year," Yun said.
The unexpected increase in US pending home sales reflected growth in the four regions, as pending sales in the West and Midwest jumped 4.6 percent and 4.5 percent, respectively. Pending home sales in the northeast rose by 2.8 percent, while pending sales in the south increased by 0.1 percent.
Last Tuesday, the US Department of Commerce released a separate report showing new home sales falling sharply in February. The ministry said sales of new US homes fell 4.4 percent to an annual rate of 765,000 in February, after rising 10.5 percent to an increased rate of 800,000 in January. With the upward revision, the annual average for new home sales in January was the highest since May 2007, when it reached 842,000.
In the beginning of this week’s trading, US stocks rose, led by big gains for health care companies, which announced developments that could help cope with the coronavirus outbreak. In general, global markets are trying to consolidate after the recent record sales, as governments and international central banks are trying to support the global economy, which is facing the inevitable recession due to Corona. The S&P 500 remained 22.4% lower than its record high last month, and oil prices fell to its lowest level in 18 years.
The S&P500 rose 3.4% on Monday to post its fourth gains in the past five days. European indices rose after erasing previous losses. Asian markets have retreated, but to a milder degree than the huge fluctuations that have rocked investors over the past six weeks.
According to the technical analysis of the pair: As I expected in recent technical analyzes for the USD/JPY, when it achieved strong gains recently, that the pair falling to around and below the 108.00 psychological support, will be supportive for the bears controlling performance, and increase the selling of the pair. The pair may remain stable until the announcement of an update for the results of important economic data that will be issued this week, led by US job figures. The bulls will not regain performance control again without the pair moving above the 110.55 resistance. I still prefer buying the pair from every lower level.
As for the economic calendar data today: From Japan, the industrial production rate, the unemployment rate and retail sales data will be announced. From China, data includes the industrial and non-industrial purchasing managers’ index. Later on, the US consumer confidence index will be announced.
