Today we shall take a look at the USD/JPY pair. It appears that the Japanese yen used most of April to recover some of its lost positions, pushing the pair to its lowest level in almost two months, but so far this week we have observed a bullish turn in the trend.
Right now, there are some conflicting factors influencing the Japanese yen. First of all, recent actions by the Bank of Japan seem to be beneficial to the JPY. The yen is more or less indifferent to the central bank’s dovishness, but it did receive a slight boost by improving GDP forecasts by the Bank of Japan, which revised its forecasts upward. However, Japan is currently experiencing another coronavirus breakout and four of its most populated prefectures are in a state of emergency. More lockdowns are in store for the affected parts of the country. In addition, investors expect this to be somewhat of a trend this year, considering how slow Japan has been to vaccinate its population. It has administered at least one dose of the Covid-19 vaccine to under 2% of its population, leaving it significantly behind European and North American developed economies.
Meanwhile, the US dollar is preparing to absorb the feedback from this week’s policy meeting of the Federal Reserve. Despite improving fundamentals in the United States, the Fed has been firm in its statements that the economy is still in need of support and is thus not expected to tighten its approach to monetary policy at this time. Nevertheless, the improving economic climate in the United States is likely going to result in more increases in the yields of US Treasury bonds, which can boost the dollar and turn the trend of the USD/JPY bullish again. In other words, for now the dollar has the upper hand in this pair.
In terms of the daily chart, we have a pivot point for the pair located at 108.02, with the pair trading above it currently. The support levels lie at 107.83 and 107.46, while the resistances are located at 108.40 (being challenged at the moment) and 108.58. The indicators of technical analysis agree in strongly recommending a sell position today.
