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20.01.2021: Market sentiment improves ahead of Biden’s inauguration: outlook for USD/JPY, AUD/USD

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Currently, market sentiment is bullish. Demand for riskier assets is rising amid the remarks of Janet Yellen, the former Fed Chair.
Yesterday, Janet Yellen made a speech before the Senate Finance Committee in anticipation of approval of her candidacy for the post of US Treasury Secretary. She warned lawmakers that “without further action, the US risks a longer, more painful recession now-and long-term scarring of the economy later.” She added that a $1.9 trillion stimulus proposal would eliminate all the negative consequences of the increased public debt.

Such rhetoric before the inauguration ceremony of the 46th US president has improved the market sentiment. This is why safe-haven assets are losing ground. The US dollar index, which measures the strength of the greenback against a basket of six major currencies, went down to the level of 90.40. Investors also took notice of Janet Yellen’s statements about the US currency. She said that its value should be determined solely by market conditions. She is not going to seek a weaker dollar for a competitive advantage as well.

The dollar/yen pair is stuck in the sideways channel within the trading range between 103.57 and 104.20. Today, the Bank of Japan began a two-day policy-setting meeting to assess the damage to the economy from a new state of emergency over the novel coronavirus. The regulator is unlikely to change the course of monetary policy. So, the meeting results will not strongly affect the market sentiment.

The Australian dollar, which is usually viewed as a barometer of risk sentiment in the Asia-Pacific session, rose amid improved market sentiment. It grew to the level of 0.7740. Technical analysis experts are confident that the AUD/USD pair may reach the level of 0.7745. Yet, they still insist on a resumption of the downward movement to 0.7674. Australia is expected to unveil employment data on Thursday. So, the Aussie is likely to gain momentum and climb to the target levels outlined by analysts.

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