Today we shall take a look at the USD/JPY pair. The pair is still trading mostly flat around the 107.70 level. It has been in this range for about two weeks and may remain so for a while yet.
Currently, the Japanese yen is at a crossroads position. On the one hand, because the yen is a safety asset, it is expected that it will strengthen when the markets are experiencing so much uncertainty. The biggest issues right now are the worsening in the relationship between the United States and China, the latter’s intervention in Hong Kong, which sparked a new wave of protests, and the fears of a second wave of the coronavirus pandemic. However, because the US dollar is also considered a safe haven, the yen hasn’t been able to appreciate against it. We need to see more factors pressure the dollar in order for the pair to turn in favor of the yen.
Some of these factors are already at hand. The United States has been in turmoil as mass protests have taken over the country since the Minneapolis police murdered George Floyd, an unarmed black man. President Trump has not handled the situation well, instead encouraging his far-right (and to that end, racist) supporters to fight back, which is further contributing to the chaos. There have also been concerns that with people protesting so close to each other, there might be more coronavirus outbreaks in the US, which is already the most heavily affected region. Moreover, there have also been disappointments on the fundamental front, but the US is hardly the exception in that regard. A more serious change in any of these situations is needed for the outlook of the USD/JPY to change. Otherwise, the flat trend will continue.
In terms of the daily chart, we have a pivot point for the pair located at 107.61, with the pair trading above it currently. The support levels lie at 107.36 and 107.12, while the resistances are located at 107.84 and 108.10. The indicators of technical analysis are confident in recommending a buy position in the daily term.
