Today we shall take a look at the USD/JPY pair. Last week the Japanese yen took charge of this pair, but it seems that this week the exchange rate tells a different tale.
Last week the markets panicked quite a bit as news about the coronavirus epidemic in China indicated that the disease continues to spread, including to other countries, and to take lives. Moreover, the epidemic comes at a high economic cost for China, as public transport, entertainment venues, and many private businesses remain closed, which would inevitably result in a drop in economic activity. Thus, investors were prompted to turn to safety assets like the Japanese yen. However, some of the tension seems to have dissipated, allowing the dollar to recover some of its lost positions against the yen.
The sentiment regarding the US dollar is also currently undergoing change. Though the USD remains strong, backed by good economic reports from the United States, investors are beginning to suspect that the Federal Reserve will lower interest rates once or twice in 2020, to help mitigate the damage to the global economy caused by China’s economic slowdown, which the virus will likely worsen. As those bets start becoming more and more popular, expect the dollar to weaken slightly.
In terms of the daily chart, we have a pivot point for the pair located at 108.60, with the pair trading above it currently. The support levels lie at 108.39 and 108.17, while the resistances are located at 108.83 and 109.03. The indicators of technical analysis recommend a strong sell position today.
