Today we shall take a look at the USD/JPY pair. After climbing to its highest level in three months, the pair rebounded. The trend turned bearish once again and right now the USD/JPY is trading near the levels from two weeks ago, i.e. around 104.60.
The movement of the Japanese yen is somewhat surprising at the moment. The US dollar has become an attractive asset for investors again due to the latest developments in the United States, which is why it has been gaining versus all major currencies for days. But it appears that the yen can put up quite a bit of resistance against the dollar; it did not allow the rate to breach the 106 level. There aren’t any domestic developments in Japan to bolster the yen so significantly, which means that the fate of the USD/JPY is once again left to the broader market sentiment and investors’ outlook for the dollar in particular.
The US dollar is in a bit of a tricky position at present. To begin with, there is a lot of optimism about the economy of the United States. Under Joe Biden’s governance, the country has ramped up its vaccination efforts. Plus, the mandatory masks on federal property may have also contributed to lowering the infection rate. The United States is currently reporting its lowest daily Covid-19 counts since the fall. Furthermore, recent fundamentals have indicated improvements on the labor market and in terms of inflation, two of the most important indicators for the Federal Reserve to decide if it needs to tighten its monetary policy. Last but not least, Biden’s stimulus bill, upon which rest many hopes about economic recovery, seems to be very close to implementation. Last week we saw intensive buying of the dollar due to expectations that a speedy recovery will lead to a more hawkish policy and will boost the USD in value. But now traders are once again reminded that the dollar is also a safe haven, and thus weakens in the absence of risk. In other words, the same factors can either weaken or strengthen the dollar, depending on how investors choose to look at the reserve currency.
In terms of the daily chart, we have a pivot point for the pair located at 105.35, with the pair trading well below it currently. The support levels lie at 105.02 and 104.82 (both overcome), while the resistances are located at 105.55 and 105.88. The indicators of technical analysis are slightly mixed but lean towards strongly recommending a buy position in the daily term.
