Today we shall take a look at the USD/JPY pair. Throughout the Christmas and New Year’s holiday season, the yen kept strengthening against the dollar. However, as of yesterday, the pair is in the green again.
Our guiding principle for trading the Japanese yen is always the same: don’t pay too much attention to economic reports from Japan, but focus instead on the global economic sentiment, with a special focus on conflicts. The yen is a safety asset, so it was able to make solid gains after the US airstrike in Iraq last week. Nevertheless, it’s been a few days and an all-out war has not begun, which is making investors revise the geo-political risk down. Moreover, the fact that the US and China are to sign a trade agreement next week is also boosting the markets and drawing attention away from safe havens like the yen.
The movement of the dollar is quite interesting at the moment, because there are opposing forces at hand. Firstly, the improvement in the trade relations between China and the US is boosting risk appetite, which weakens the USD. However, the United States being at odds with Iran and possibly Iraq is increasing the demand for safe assets such as the dollar, thereby increasing their value. Thus, the day-to-day movements of the USD depend on which type of sentiment dominates the market. The overall expectation for the dollar is for it to remain strong on account of the health of the US economy.
In terms of the daily chart, we have a pivot point for the pair located at 108.28, with the pair trading above it currently. The support levels lie at 108.06 and 107.69, while the resistances are located at 108.65 and 108.87. The indicators of technical analysis recommend a strong sell position today.
