Today we shall take a look at the USD/JPY pair. The pair’s descent appears to have ended in mid-September, so since then we have observed a steady upward trend, thanks in no small part to the dollar’s strengthening.
The Japanese yen is currently somewhat pressured by domestic factors. Though Japan was not affected too heavily by the coronavirus pandemic, its economy was not immune to its effects altogether, and now the country is facing a negative inflation rate. The Bank of Japan, somewhat surprisingly, has not bumped up its current stimulus program to compensate for the negative inflation, but BoJ Chief Kuroda stated that he expects the economy will show signs of recovery in a few months without adjustments as the pandemic and other negative factors slowly diminish. Though the recent increase in the demand for safe havens among investors should have further strengthened the JPY, it appears that the recession-ridden Japanese economy is not making the yen particularly appealing at the moment. Thus, the Japanese yen is not benefiting from the current risk-off market sentiment.
The US dollar is in the complete opposite position. Even though the economy of the United States has experienced a lot of devastation due to the coronavirus pandemic, which has not ebbed in the country since March, the dollar remains the most preferred safety asset on the market. Congress has been very slow in coming up with a new stimulus plan, and that was before the death of Supreme Court Judge Ruth Bader Ginsburg added to the pre-election administrative chaos in DC. Thus, with no more stimulus in sight, the economic recovery in the US is slowing down, encouraging investors to bet their money on safe havens like the dollar. Moreover, pairs with the USD will be extra volatile today due to this evening’s debate between Donald Trump and Joe Biden.
In terms of the daily chart, we have a pivot point for the pair located at 105.48, with the pair trading above it currently. The support levels lie at 105.27 and 105.05, while the resistances are located at 105.70 and 105.91. The indicators of technical analysis are somewhat mixed but lean towards recommending a buy in the daily term.
