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Is the Greenback in for more weakness on the latest U.S. political ruckus?

USD/JPY is on a steady downtrend, moving inside a descending channel on its 1-hour time frame.

Before we look at the potential setup, check out the top headlines that rocked the markets in the late U.S. and early Asian sessions:

Major Forex Pairs Price Performance from MarketMilk
Major Forex Pairs Price Performance from MarketMilk

Upcoming Potential Catalysts on the Economic Calendar:

  • 7:45 am GMT Swiss jobless rate
  • 8:00 am GMT German factory orders
  • 8:30 am GMT Swiss retail sales
  • 10:00 am GMT ECB Economic Bulletin
  • 10:30 am GMT U.K. construction PMI
  • 11:00 am GMT: Eurozone flash CPI readings

What to Watch: USD/JPY

USD/JPY 1-hour Forex Chart
USD/JPY 1-hour Forex Chart

Is this year just 2020 Part II or what?!

The world was shook by headlines of Trump supporters breaking into the U.S. Capitol while Congress was busy certifying President-elect Biden’s victory.

As it turned out, the Donald is still refusing to concede to Biden, spending weeks riling up his hardcore fans with allegations of voter fraud.

With that, the U.S. dollar could be in for a rocky start of the year, and it looks like the downtrend on USD/JPY could carry on.

The pair is already in the middle of a pullback to the channel resistance around the 103.50 minor psychological mark, and technical indicators confirm that sellers are still in control.

As you can see from the chart above, the 100 SMA is below the 200 SMA to reflect the presence of bearish pressure while Stochastic is heading south.

Risk aversion could favor the lower-yielding Japanese currency moving forward, especially if the U.S. continues to face this kind of political uncertainty.