Today we shall take a look at the USD/JPY pair. The rate has stayed close to the same levels for almost two months now, with the exception of one push to 109.60 in early June and another one to 107.90. Still, the exchange rate has been mostly flat around 107.20.
The Japanese yen finally might have some factors in its favor, after leaving the USD/JPY rate to be decided by the dollar for months on end. The JPY has the potential to grow if the coronavirus pandemic continues to develop negatively. Right now the situation remains quite serious, with over 60,000 new cases added in the United States daily, with high numbers also observed in Brazil and other parts of South America; India, Russia, and South Africa are also still dealing with massive outbreaks. In addition, the earnings season in the US can also expose some market weaknesses that the tech sector has been “covering” for. Together, these factors paint a grim picture of the global economy, so this week the demand for safety assets can increase, which will boost the Japanese yen.
Normally when we talk about a risk-off mood dominating the financial markets, the dollar reacts well to it, strengthening as another safe haven instrument. But because the Covid-19 outbreak in the United States is so much worse than in other places, and because US companies might not be able to keep up with a prolonged crisis, the dollar may find itself under more pressure than it did earlier in 2020. Even if fundamental reports from the US are positive, investors are not going to read too much into it because most of the data is taken from before the resurgence of the coronavirus in the United States began.
In terms of the daily chart, we have a pivot point for the pair located at 107.13, with the pair trading above it currently. The support levels lie at 106.93 and 106.58, while the resistances are located at 107.48 and 107.68. The indicators of technical analysis are mixed today but ultimately recommend a sell position in the daily term.
