Today we shall take a look at the USD/JPY pair. The trend has formed a series of three gradually lower peaks, showing that the upwards momentum has worn out and now a bearish bias will likely take over the pair.
Japan, like virtually any other country in the world, is currently wrestling with the coronavirus pandemic. The outbreak in Japan was a bit delayed compared to other countries nearby, but it did come, and with it came a growing concern for the Japanese economy, which was already constricting even before the pandemic began. At present, the Japanese yen was able to strengthen slightly after the Bank of Japan announced a fresh new stimulus plan that is supposed to support the economy through the crisis. However, growth and inflation projections for the Japanese economy remain extremely low. Also, investors appear to be opening up to risk once more, which could weaken the yen.
The US dollar has been holding steady after it beat the Japanese yen to the title of the most preferred safety asset on the market. In general, the conditions for the dollar are simply better than they are for the yen, which is why the USD is more reliable. Nevertheless, as more and more countries are beginning to reopen their economies, there will be a lower demand for safe currencies like the dollar and the yen. While in the short term the JPY is recovering due to the BoJ’s most recent announcement, the dollar still remains better poised to dominate this pair in the long term.
In terms of the daily chart, we have a pivot point for the pair located at 107.29, with the pair trading below it currently. The support levels lie at 106.94 (overcome) and 106.64, while the resistances are located at 107.59 and 107.94. The indicators of technical analysis strongly recommend a sell position in the daily term.
