Today we shall take a look at the USD/JPY pair. Though we saw a little bit of doubt at the end of last week, now the exchange rate of this pair has entered another bullish wave, which is likely to hold for the duration of this week and perhaps even longer.
Nothing is working out in the Japanese yen’s favor at the moment. There isn’t too much of a demand for safe haven assets at present, which makes the JPY less appealing than more risk-friendly assets. In addition, the situation in the Japanese economy is quite familiar and unsurprising: weak inflation and recovery. Thus, the Bank of Japan (and the government) remains dovish-minded, preventing the yen from strengthening in the long term.
As for the US dollar, it is currently experiencing boom after boom. Last week’s suggestion by the Federal Reserve’s most dovish member, Richard Clarida, that the regulator needs to have a conversation about the rising inflation rate in the United States gave the USD a major boost, because it suggests that the central bank might have to hike rates sooner than it has so far claimed to be preparing for. In addition, President Joe Biden chose to nominate Jerome Powell for a second term as head of the Federal Reserve, ensuring stability and continuity in the regulator’s work. All of this, plus positive reports from the US, has strengthened the US dollar and sent the US Treasury yield higher, further pressuring the JPY.
In terms of the daily chart, we have a pivot point for the pair located at 114.58, with the pair trading above it currently. The support levels lie at 114.19 and 113.51, while the resistances are located at 115.26 and 115.65. The indicators of technical analysis agree in strongly recommending a buy position.
