Today we shall take a look at the USD/JPY pair. The trend of this pair is getting interesting again. It has recently formed two ascending peaks, with a decline last week. But today the rate is in the green again - could we be seeing the beginning of a third climb?
At present, there are not many factors that are intrinsic to the Japanese yen to influence this pair. The yen typically only reacts when there are increases or decreases in the demand for safe havens, but at the moment the market’s focus is more on inflation, boosting assets that are likely to recover from the pandemic faster than the rest. This so-called reflation trading has been much kinder to the US dollar than the yen, as the United States is on course to recover from the Covid-19 disaster streak before any other currency (except, perhaps, the British pound).
There are many events surrounding the US dollar of interest to traders on the radar these days. Today and tomorrow Federal Reserve Chair Jerome Powell will be giving a detailed testimony on monetary policy before Congress. Investors will scrutinize the Chair’s statements carefully, though Powell is expected to confirm that despite the uptick in inflation, the Fed will not turn hawkish anytime soon. In addition, the gains in the yields on US Treasury bonds and recent encouraging fundamental data, paired with the likely adoption of Joe Biden’s $1.9 trillion stimulus bill and speedy vaccinations against Covid-19 in the United States are all fueling the hope of a quick economic recovery. This tends to draw interest away from safe havens like the yen, while also supporting the dollar.
In terms of the daily chart, we have a pivot point for the pair located at 105.30, with the pair trading right at it currently. The support levels lie at 104.75 and 104.43, while the resistances are located at 105.62 and 106.17. The indicators of technical analysis are currently unable to project a strong signal in either direction in the daily term. More convincing signals are necessary to make a judgement regarding this pair today.
