Today we shall take a look at the USD/JPY pair. Over the past month, with the developments surrounding the coronavirus pandemic, the pair has experienced a lot of ups and downs. Even this week, the trend seems undecided between bearishness and bullishness.
The Japanese yen is currently competing with the dollar for the title of most preferred safe haven asset, which is why the trend of the USD/JPY is undergoing so many changes. When the coronavirus outbreak first began and Japan was one of the most at-risk countries, the US dollar easily took the crown, and the yen slumped. However, the virus did not spread in Japan to the extent it did in other countries, including the United States. This helped restore the reputation of the yen somewhat and allowed it to push the pair to near four-year lows. Though it has since retreated higher than these minimums, we expect the yen to win against the dollar and continue to slowly drive the trend towards more bearishness in the future.
One crucial factor that either gives the dollar momentum or takes it away from the USD is the policy-making of the Federal Reserve at the moment. The Fed has been arguably the fastest-acting central bank, implementing emergency cuts and unveiling stimulus packages without any hesitation. The Fed’s first emergency cut weakened the dollar, but subsequently allowed it to stabilize. Though the USD remains strong and is still a highly desirable safety asset, we expect to see more damage from Covid-19 in the United States than in Japan, possibly causing the dollar to depreciate against the yen.
In terms of the daily chart, we have a pivot point for the pair located at 106.30, with the pair trading above it currently. The support levels lie at 105.03 and 103.88, while the resistances are located at 107.46 and 108.72. The indicators of technical analysis are quite mixed but ultimately recommend a sell position in the daily term.
