Today we shall take a look at the USD/JPY pair. The Japanese yen used most of last week to recover its previously lost positions against the dollar. Now the trend seems to be getting flat again, not fluctuating too far from the 107.30 level.
The Japanese yen was able to stage a short-lived rally against the US dollar last week thanks to a series of grimm forecasts made by economists about the post-pandemic recovery process. But although there has been disappointing data from around the world, plus possible signs of a second wave of the pandemic, last week markets remained mostly risk-positive. That scenario is not good for the yen per se, but it was worse for the dollar, which is why we saw the JPY strengthen. Considering both the dollar and the yen are safe haven assets, the rate of the USD/JPY will likely remain volatile.
The US dollar is now slightly stronger than it was against the yen last week due to a possible increase in the demand for safe havens. The United States, though the largest and healthiest economy in the world, was also the place worst affected by Covid-19, so the Federal Reserve expects at least two years will be necessary before the economy could recover. This week there will be more fundamentals (e.g. retail sales later today, jobless claims on Thursday) and we will get to hear from Jerome Powell again, which all offer opportunities for the dollar to strengthen on possible market pessimism. Indeed, whether the trend turns one way or another depends entirely on how the US dollar is performing, since there are no factors to strongly influence the Japanese yen.
In terms of the daily chart, we have a pivot point for the pair located at 107.30, with the pair trading slightly below it currently. The support levels lie at 107.02 and 106.72, while the resistances are located at 107.60 and 107.88. The indicators of technical analysis are strongly recommending a sell position in the daily term.
