Today we shall take a look at the USD/JPY pair. Ever since the beginning of December, the trend has gradually turned into a downward one.
Japan has been releasing numerous economic reports lately, but they did not surprise investors in the slightest. Recently, earnings have increased, but spending has dropped, which is common in economies that are undergoing a recession. The Q3 GDP reading was surprisingly positive, with an annualized growth of 1.8% versus the forecasted 0.6%. On Friday, we expect the Tankan surveys; overall, data coming from Japan is not abysmal, but it is also not positive enough to support the yen. Thus, the JPY relies on global risk avoidance to strengthen, most specifically the developments in the trade conflict between China and the United States.
The US dollar continues to be more volatile than usual due to the constant flow of news regarding the Sino-American trade war. Despite President Trump’s claims that China is paying the tariffs, the money actually comes out of the pockets of US businesses who import goods from China, so the longer the conflict persists, the more hard-pressed American companies become. Last week’s ISM non-manufacturing index was worse than expected, as were the durable goods orders. However, unemployment is decreasing, which, paired with several other positive reports, confirms that the Federal Reserve will most likely not change the interest rate at this week’s policy meeting. Tomorrow’s CPI reading will be key to determine whether there is any basis for a rate adjustment, but right now the market is pretty calm.
In terms of the daily chart, we have a pivot point for the pair located at 108.56, with the pair trading above it currently. The support levels lie at 108.44 and 108.31, while the resistances are located at 108.69 and 108.81. The indicators of technical analysis recommend a strong sell position today.
