Today we shall take a look at the USD/JPY pair. Over the past two weeks the pair has been trading in a narrow range. Despite the strengthening of the USD, the Japanese yen is showing more resistance than other currencies because of the highly volatile developments in the trade talks between the US and China.
Despite a lackluster economic performance in Japan, the yen did not allow the dollar to appreciate against it as much as other currencies have. The resistance of the yen is largely due to the constant back and forths in the news about the US-China trade war. For weeks, both countries kept assuring the markets that a deal is close to being finished and ready for signing, yet the US Congress introduced a bill that addresses the protests in Hong Kong, upsetting China and lowering investors’ hopes for a trade deal. The JPY is quite sensitive to such changes because it is the most preferred safety asset, gaining in price each time the markets turn pessimistic. Right now there is still hope that the US and China can patch things up, so the yen is relaxing again, but it may not last long.
At the moment, the American dollar is strengthening. Thanks to Donald Trump’s decision to postpone the signing of the Hong Kong bill, it is still possible for China and the United States to reach a trade agreement. Moreover, the Federal Reserve has reiterated that there is no need for further rate cuts right now, so the dollar will most likely not weaken. Today we expect a trade report which may cause some volatility in this pair.
In terms of the daily chart, we have a pivot point for the pair located at 108.90, with the pair trading above it currently. The support levels lie at 108.79 and 108.58, while the resistances are located at 109.10 and 109.22. The indicators of technical analysis recommend a strong buy position today.
