Today we shall take a look at the USD/JPY pair. Last week the pair briefly broke above the strong resistance at 110, but did not manage to last long in that range. It retreated from it before starting another climb towards that level again this week, but as of now still remains below 110.
Like we have reported previously, the Japanese yen does not have any domestic factors interfering with it. The country is still feeling the negative effects of the coronavirus pandemic, and Prime Minister Yoshihide Suga announced that he will be stepping down, so there will be a bit of chaos around the transition of power. Thus, the situation in Japan is not particularly encouraging and cannot support the yen, though it is not necessarily weakening it either. Nevertheless, the JPY could push the trend into bearish territory again if investors start demanding more safe haven assets due to the generally unfavorable situation with the coronavirus pandemic around the globe.
Meanwhile, the US dollar might actually weaken this week, allowing the pair to sink further down. The reason for this lies in the change of sentiment among investors. Until recently, the consensus was that the Federal Reserve would start tightening its monetary policy soon, which made the dollar stronger. But now there are increasing doubts over when this would happen. For example, today’s inflation data for August was rather disappointing, with three out of four reports failing to meet the forecasts. This will certainly convince the Federal Reserve that it is too early to start withdrawing stimulus, especially while the fourth wave of the pandemic rages through the United States.
In terms of the daily chart, we have a pivot point for the pair located at 110.00, with the pair trading below it currently. The support levels lie at 109.83 and 109.68, while the resistances are located at 110.15 and 110.32. The indicators of technical analysis are slightly mixed but lean towards recommending a sell position in the daily term.
