Today we would take a look at the USD/JPY currency pair. After yet another recent decline, the pair turned bullish over the weekend.
Right now the American dollar is supported by the Federal Reserve’s hawkishness. The minutes from their August meeting were released yesterday, meeting analysts’ expectation that there will be two more rate hikes this year, with the first one of the two coming next month. The Fed so far has stood by its policies, despite criticism from President Trump, who dislikes the strengthening of the dollar as it discourages international trade. Moreover, it seems that the economy is strong enough to withstand political pressure, as all hell is breaking loose in the White House regarding the Russia investigation. We expect the USD to continue to hold strong.
On the other hand, the Japanese yen does not have much incentive to change. The Bank of Japan, significantly enough, showed a willingness to revise its policy and consider increasing interest rates if they see a rise in inflation. However, inflation still remains low, so for now we cannot expect a hawkish turn by the BoJ. Moreover, the yen could make modest gains here and there at times of trouble, which is why it was one of the big winners last week amid the collapse of the Turkish lira. If worries on the global markets persist, we could see a rally of the yen.
In terms of the daily chart today we have a pivot point for the USD/JPY pair located at 110.40, with the pair currently trading slightly above it. We expect the rate to continue rising, so look towards the nearby daily resistance levels at 110.77 and 110.99. In case the yen strengthens, look to the supports at 110.18 and 109.81. The indicators of technical analysis are giving us a mixed signal right now, leaning towards a sell recommendation.
