Today we would take a look at the USD/JPY currency pair. Since last week the pair has dropped significantly.
In the United States things continue for the dollar in much the same way as the past months: the fundamentals are solid, while the Administration’s policy-making is not. The dollar is supported by economic statistics and enjoys the confidence of the Federal Reserve, with another interest rate increase expected in two months. However, the impact of the trade war is gradually coming into view with rising manufacturing costs. Today we expect the trade balance for June, as well as some jobs reports from the US, which can help further assess the state of the economy. We also expect the Q2 GDP data on Friday, which is forecasted at 4.2% and will have a major impact on the dollar.
The Japanese economy also remains unchanged. The land of the rising Sun is struggling with low inflation and stagnant economic growth, despite the Bank of Japan’s efforts to stimulate the economy. The yen doesn’t have much incentive to grow from within Japan, however, it does usually benefit from times of market uncertainty, since it serves as a safe-haven trading instrument. The yen’s rally that we are seeing right now is most probably just a correction to balance the previous growth cycle.
In terms of the daily chart today we have a pivot point for the USD/JPY pair located at 110.97, with the pair currently trading slightly below it. We expect the rate to decline a bit today, so look towards the nearby daily support levels at 110.56 and 110.25. In case the yen relaxes once again, look to the resistances at 111.28 and 111.69. The indicators of technical analysis indicate a strong sell signal right now.
