Today we shall take a look at the USD/JPY pair. It seems traders interested in this pair will have to wait if they are hoping for volatility. The second half of June was characterized by a very mild fluctuation around the 107 level and it seems the rate is forming a flat trend again in July, at least so far.
The Japanese yen itself remains a tool whose movement is hard to predict. The JPY is traditionally viewed as a safe haven but the demand for safe assets is no longer enough to predict where the yen will go, not to a small extent due to the American dollar’s displacing the JPY as the most preferred option in that scenario. However, the performance of US stock indices can be used as an alternative touchstone. The overall trend of the three main indices (S&P 500, Dow Jones, and Nasdaq) tends to move in the opposite direction of the yen. Thus, when we see these indices grow, we can expect the JPY to be weaker. These stocks themselves are supported by stimulus packages implemented in the United States. There is a new bill of $1.5 trillion on the horizon, which President Trump does not seem fond of, so stock indices might decline if Trump refuses to sign the bill into effect. This, in turn, will be good news for the yen. Other than the trends with the three main US stock indices, there isn’t much that can affect the JPY at present.
Though no one is disputing the US dollar’s status of the strongest currency in the world, which shines especially bright in times of trouble, not unlike the yen, the third quarter of 2020 might bring new challenges for the USD. Similar to the JPY, the dollar is boosted when there isn’t enough stimulus for the economy, or when fundamental reports come in worse than expected. Still, all of this may fade in the background if the trade relations between the United States and other major economies (China, the EU) worsen. Investors fear that that is, in fact, the direction in which we’re headed. So, besides economic indicators, we need to keep an eye on political news from the US to evaluate any possible risk factors that may harm the dollar.
In terms of the daily chart, we have a pivot point for the pair located at 107.47, with the pair trading above it currently. The support levels lie at 107.16 and 106.94, while the resistances are located at 107.69 and 108.00. The indicators of technical analysis are strongly recommending a buy position in the daily term.
