Today we shall take a look at the USD/JPY pair. In the beginning of the month, the dollar pushed strongly against the yen, but in the last ten days the pair’s movement has been a bit less predictable, fluctuating in a narrow channel.
The coronavirus epidemic in China has had a chilling effect on the global financial markets, bolstering investors’ interest in safety assets such as the Japanese yen. In fact, the JPY continues to be a popular choice for traders wishing to avoid risk, but the US dollar is also a safe haven instrument, thus serving as a rival of the yen. However, the Japanese yen is facing increasing pressure from the poor performance of the economy of Japan, which is currently wrestling with stagnant growth. Yesterday, Japan released the GDP report for the fourth quarter of 2019, which indicated the economy didn’t grow at all, and in fact shrank by -6.3%, almost twice more than the forecasted -3.8%. This puts the yen in a tough spot, preparing it for a further weakening.
On the other hand, the US dollar is well-supported by positive economic reports from the United States. The Federal Reserve recently appraised the economy, stating that the US will likely not need any adjustments to the monetary policy in the near future. The Fed is also going to limit its asset purchasing program to curb liquidity, which will in turn make the American dollar stronger. We expect the USD will easily overtake the Japanese yen.
In terms of the daily chart, we have a pivot point for the pair located at 109.84, with the pair trading below it currently. The support levels lie at 109.72 and 109.60, while the resistances are located at 109.96 and 110.08. The indicators of technical analysis recommend a strong buy position today.
