As a safe-haven currency, the market’s risk outlook is the primary driver of JPY. Economic data rarely proves market moving; and although monetary policy expectations can prove highly market-moving in the short-term, safe-haven flows are typically the more dominant factor, especially in the current environment given the ongoing coronavirus outbreak and global economic slowdown. The market’s overall risk tone is cautiously improving with coronavirus vaccines in the very early stages of being rolled out in several countries. Of course, there remains many uncertainties and many countries are continuing to fight second waves of the virus.
Nevertheless, as a whole, the outlook is tentatively improving. Given the tentatively improving risk outlook, we expect safe-haven demand to gradually diminish in the months ahead, resulting in a weak bearish fundamental outlook.


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