Amid expectations of low volume and short-term fluctuation, the USD/JPY continued in limited ranges and the pair stabilized around the 103.65 level as of this writing. During yesterday's trading, the movement was limited between the 103.40 and 103.90 levels. This week is still subjected to public holidays and there are no major economic numbers due from the UK, US or Europe. This leaves the few investors who may be proactive to respond according to the tide and flow of developments in the US stimulus bill.
Concern has returned to financial markets about the stimulus plans to help the US economy in the face of the pandemic. In this regard, Speaker of the House of Representatives Nancy Pelosi announced: "Republicans have a choice: vote for this legislation or vote to deprive the American people of the greater salaries they need." All in all, the confrontation could end up being more symbolic than substance if Trump's efforts in the Senate fade away.
The legislative action during the holiday week's session may not do much to change the more than $2 trillion in federal relief and COVID-19 spending that Trump signed on Sunday, one of the largest bills of its kind, providing relief to millions of Americans. This package - $900 billion in COVID-19 aid and $1.4 trillion in funding for government agencies - will provide long-awaited money for businesses and individuals and avoid the federal government shutdown that was to begin Tuesday, in the midst of a public health crisis.
The COVID-19 package builds on a previous effort from Washington. It is providing billions of dollars to purchase and distribute vaccines, track contact with the virus, public health departments, schools, universities, farmers, food storage programs, and other institutions and groups facing difficulties in the epidemic.
Americans who earn up to $75,000 will qualify for direct payments of $600, which are phased out at higher income levels, and there is an additional $600 for each dependent child. Meanwhile, the government funding portion of the bill keeps federal agencies across the country running without drastic changes until September 30th.
Economists say that months from now, the widespread distribution and use of vaccines will likely lead to a strong economic recovery as the virus is wiped out, businesses reopen, employment resumes, and consumers spend freely again. However, the aid will likely not last long enough to support struggling small businesses and the unemployed until the vaccine is widely distributed and a strong recovery begins. "Some aid is better than none at all," said Gregory Daco, chief US economist at Oxford Economics. "It is a positive thing. But it will probably not be sufficient to fill the gap from today until late spring or early summer, when the health condition completely improves."
Technical analysis of the pair:
As there is no change in the performance, there is no change in the technical analysis. In general, the bears' control over the USD/JPY performance is still stronger, and stability below the 104.00 support warns of preparing to test stronger support levels, the closest of which are currently 103.45, 102.90 and 102.00, respectively. At the same time, those levels still support the technical indicators' move towards strong oversold areas. Therefore, the best way forward for Forex traders is to buy rather than sell. On the upside, there will be no initial chance for the bulls to dominate without breaking the 106.00 resistance. Still, I would prefer to buy the pair on every drop.
