Today we shall take a look at the USD/JPY pair. In the past two weeks the trend managed to complete two consecutively higher peaks, but we find it on its way down again today after it failed to stay consistently above the 110 level.
As is typical of the Japanese yen, there is hardly anything going on inside Japan to influence it. The JPY remains the favorite safe haven asset of investors, so its strength depends entirely on whether risk appetite is low or high. Lately, it has been low on most days due to the rapid spread of the delta variant of the coronavirus around the world, especially affecting the two most important economies: the United States and China. However, right now it seems that some of the Covid-19 pessimism is fading, especially considering the Federal Reserve did not take a particularly hawkish tone at their symposium last week, which ended up boosting risk-loving assets, hurting the yen.
Perhaps the most important factor for the USD/JPY this week will be the August non-farm payrolls report from the United States, together with the latest update on the unemployment rate due this Friday. NFP data is an important measure of how well the US labor market is adjusting, since employment, much more so than inflation, matters to the Federal Reserve as an indicator of economic recovery. As a result, if the NFP report is better than expected, this will heighten the chance of monetary policy tightening sooner. If it’s lower, the markets will prepare for prolonged dovishness, which is going to weaken the dollar.
In terms of the daily chart, we have a pivot point for the pair located at 109.86, with the pair trading right around it currently. The support levels lie at 109.75 and 109.59, while the resistances are located at 110.02 and 110.13. The indicators of technical analysis are too mixed today and show a neutral bias for the pair.
