Today we would take a closer look at the USD/JPY currency pair, an instrument bound to be volatile. The pair was in a downward channel from the very end of 2017. Despite a few small corrections, this channel dominated the chart until yesterday, when we began to see some upwards movement.
The American dollar has now been dropping in price for seven weeks, its longest downward spiral in more than a decade. The USD previously made some corrections but the growth didn’t last. In 2015 and 2016 the dollar was largely propelled because of the Federal Reserve’s move to begin increasing interest rates, making the United States the first country to start tightening its monetary policy since the 2008 crisis. Another factor was Trump’s presidential win, as many investors expected a more conservative, protectionist, industrial-heavy economy under Trump. Nevertheless, now there are strong economic statistics from all around the world, and some other central banks are beginning to tighten their policy, making the Fed’s hikes less significant (they are also expected by traders, so they have lost their potential to cause spikes). Furthermore, the political issues surrounding Trump’s presidency have also done their fair share in decreasing investors’ confidence in the dollar.
On the other hand, the Bank of Japan recently made positive statements about the Japanese economy. The news that Japan may be moving towards a monetary policy tightening caused the yen to appreciate against most currencies, including the USD. We expect it to continue doing so.
In terms of the daily chart, today we have a pivot point located at 109.08. Our overall expectation is for the USD/JPY to remain bearish, so watch out for the support levels at 108.71 and 108.23. Alternatively, if the pair grows beyond the pivot, keep an eye on the resistances at 109.57 and 109.93. The recommendations given by technical indicators are for a strong buy in the hourly term, but a strong sell in the daily one.
