Today we would take a look at the USD/JPY pair. The rate of this pair has been erratic over the past few days, but with a couple of consecutive downward candles the bias is bearish at the moment.
The Japanese yen continues to strengthen, despite the economic situation in Japan. The Bank of Japan has already loosened its monetary policy as much as possible. Interest rates are below 0 and the bank is engaged in extensive bond buying as stimulus. Yet, inflation remains low and is actually sinking lower as we speak. The annual rate for 2019 so far is as low as 0.4% against a target of 2%, which seems entirely unattainable at this point. The JPY owes its strength to the trade war between the US and China, and all of the uncertainty this conflict brings. Nothing the BOJ does now can weaken the Japanese yen, but its appreciation only helps lower inflation, instead of increasing it.
The American dollar is doing alright. Granted, the extended trade war with China is not helping things. The burden of the trade tariffs falls on US businesses and many anticipate the US economy to start showing signs of a recession soon, which would then affect the USD. However, at present, the dollar has a chance to strengthen, provided that the Federal Reserve show that they are not ready to cut interest rates further. Today we await the ISM reports on manufacturing and employment, which are very important for the USD.
In terms of the daily chart, we have a pivot point for the pair located at 106.22, with the pair trading below it currently. The support levels lie at 106.04 and 105.87, while the resistances are located at 106.38 and 106.57. The indicators of technical analysis are currently neutral, but the moving averages recommend a strong sell.
