Today we shall take a look at the USD/JPY pair. In the second half of January, this pair was all about the yen, which gained momentum in the panic surrounding the coronavirus outbreak. However, we are seeing a bullish recovery in February and a possibility for the dollar to expand further upwards.
Although the deadly coronavirus currently affecting all of China and more than 20 other countries around the globe is definitely a negative development, the Japanese yen initially welcomed the news. The JPY is one of the fastest-acting safety assets in the world and is naturally boosted in times of market uncertainty. So, why did the the yen’s momentum dissipate in February, even though the virus still poses a threat?
The likely culprit for the current bullishness seen on the chart is the discrepancy between the economies of Japan and the United States. The Bank of Japan’s policy-making is ultra loose due to stagnant inflation, while the US is enjoying an overwhelmingly positive economic performance.
In fact, the US dollar also serves as a safe haven in times of trouble and benefits in part from the same factors that boost the yen. In other words, the virus has been good for both the yen and the dollar. But the better fundamental reports from the United States in the past week have further increased investors’ demand for the USD, thus tipping in the scales in favor of the dollar.
In terms of the daily chart, we have a pivot point for the pair located at 109.75, with the pair trading above it currently. The support levels lie at 109.62 and 109.48, while the resistances are located at 109.89 and 110.02. The indicators of technical analysis recommend a strong buy position today.
