Today we shall take a look at the USD/JPY pair. Since the beginning of this summer, the trend has pushed lower, corrected itself, then gone further down. Last week it touched a minimum last seen in early March when the coronavirus started spreading outside of China, and still remains near those levels.
The current market situation is perfect for the Japanese yen. Safe haven assets are in high demand due to the global panic associated with the coronavirus pandemic, which is currently going around for the second time in numbers that are far higher than the world’s first bout with the virus in the spring. In addition, there is a ton of new volatility flooding the market because today is Election Day in the United States. This election is expected to be quite contested and due to increased mail-in voting for the sake of social distancing, it may take a couple of days before the final results become public. Because Trump and Biden have very different outlooks and policy plans, a lot hinges on this election. In addition, Trump has signalled that if he loses the election, he won’t go down easily and will likely contest the results and ask for recounts. All of this uncertainty is buying time for the yen to appreciate against the USD, especially if we see the S&P 500 drop again, which has been the trend in the past few months.
The American dollar benefits from more or less the same factors as the yen as it is also a safety asset. Everything mentioned above - the presidential elections, the coronavirus pandemic, the drop in the S&P 500 over the last few months, also serves to strengthen the dollar. Thus, it is hard to predict the trend of a pair where both currencies have a bullish outlook. It is likely that we will see another short-term flat form on the chart, at least until the election results start coming in. Because the elections are taking place in the United States, the USD will be more affected by the results and more volatile than the yen.
In terms of the daily chart, we have a pivot point for the pair located at 104.76, with the pair trading below it currently. The support levels lie at 104.56 and 104.40, while the resistances are located at 104.92 and 105.12. The indicators of technical analysis agree in strongly recommending a sell position in the daily term.
