Today we shall take a look at the USD/JPY pair. The pair spent the last week climbing, settling around 110.52 yesterday, but now seems to be moving in a bearish manner again.
At present there are no domestic factors influencing the Japanese yen. The economic situation in Japan, which is in recession, has not changed for years. The country’s current experience with the coronavirus is not helping things, and the Bank of Japan will likely need to stay accommodative for a very long time. In fact, the BoJ may well be the most dovish bank in the world, even more so than the ECB. Moreover, the yen was recently able to gain some ground versus the dollar due to risk aversion among investors, but this week the markets are a bit calmer and safe havens like the yen are not in high demand anymore.
As for the US dollar, the most relevant event right now is the upcoming monetary policy meeting of the Federal Reserve, which is going to take place on Tuesday and Wednesday this week. The Fed has promised to give an early warning when it starts getting ready for tapering the stimulus that it is still pumping into the US economy. Thus, investors are curious to see if such an announcement will come this week in order to prepare the markets for tapering in a few months, which is growing more likely by the day, considering how quickly inflation is rising in the United States. Any signs of hawkishness this week will likely boost the US dollar.
In terms of the daily chart, we have a pivot point for the pair located at 110.35, with the pair trading below it currently. The support levels lie at 110.11 and 109.88, while the resistances are located at 110.59 and 110.82. The indicators of technical analysis are a bit mixed but lean towards recommending a buy position today.
