Today we shall take a look at the USD/JPY pair. Though the exchange rate was increasing at the end of April and beginning of May, last week a new downward wave began. So far this week the trend has been mostly flat around 108.70, so it remains to be seen if the bearish movement will continue.
The Japanese yen continues to suffer from a lack of domestic factors to either support or weaken it. The Japanese economy has been dealing with recession and deflation since before the coronavirus pandemic began, and the recent resurgence of Covid-19 has not had a positive effect on it. Nevertheless, despite some countries still struggling with the pandemic, there does not appear to be much demand for safety assets like the yen among investors. Thus, the JPY is not an appealing asset to invest in at present, which is preventing it from strengthening.
The fate of the USD/JPY pair at the moment depends entirely on the dollar and investor sentiment towards it. Last week’s data showed non-farm payrolls were nearly four times lower than expected and the unemployment rate was higher than the forecast, which has weakened the dollar against most major currencies. Still, this week we are seeing US Treasury bond yields rise again due to the Federal Reserve’s accommodative monetary policy, which could support the dollar and prevent a further bearish drop in this pair. Inflation reports tomorrow are also likely to influence the USD/JPY.
In terms of the daily chart, we have a pivot point for the pair located at 108.77, with the pair trading below it currently. The support levels lie at 108.47 and 108.16, while the resistances are located at 109.08 and 109.38. The indicators of technical analysis are a bit mixed but lean towards recommending a sell position today.
