Today we shall take a look at the USD/JPY pair. After a sharp upwards jump at the end of last week, now the pair is retreating once again, albeit modestly.
The Japanese yen typically serves as one of the most preferred safety assets in times of trouble, and the coronavirus epidemic certainly counts as one such event. However, Japan is directly affected by the virus - not only does it have close business ties with China (what country does not?), but there have also been cases of it registered in Japan, and a whole cruise ship stands quarantined in a Japanese dock. Due to this more immediate exposure to the virus, as well as disappointing economic data recently, the yen has lost favor with investors.
On the other hand, the US dollar initially reacted quite well to the Covid-19 outbreak. Cementing its status as a safe haven asset, the dollar reached impressive highs as it attracted investors from all over the world. Nevertheless, the seriousness of the situation, combined with the realization that many US companies rely on Chinese manufacturers (many of which have closed down or work at limited capacity right now) have shifted things for the USD a bit, causing it to weaken. In addition, investors got spooked by an inversion in US Treasury yields, which could signal an upcoming recession. The Federal Reserve might see the need to cut interest rates preemptively to support the economy, and this prospect is weakening the dollar right now.
In terms of the daily chart, we have a pivot point for the pair located at 110.96, with the pair trading below it currently. The support levels lie at 110.24 and 109.61, while the resistances are located at 111.59 and 112.31. The indicators of technical analysis are mixed but ultimately recommend a strong buy position today.
