The pair shows a strong bullish momentum.
Today we would take a look at the USD/JPY currency pair. The price has retreated from the highs registered at the beginning of October and is holding steady within a channel between 111.64 and 112.88.
The American dollar continues to ride on positive economic data. Nevertheless, this week it was political factors that mainly influenced the reserve currency. On Tuesday in the United States midterm elections were held, where the Democrats managed to win back a majority in the House of Representatives, spoiling the previous majority of the Republican Party in Congress. This calmed the markets, as a more heterogeneous Congress means Donald Trump cannot afford to be impulsive anymore and his moves would be a bit more predictable for market analysts. The election results strengthened the stock markets, which also weakened the Japanese yen. Moreover, the Federal Reserve will announce their plans for the near future later today; investors expect a rate hike in December this year and at least two hikes in the first half of 2019.
Japan’s currency remains weak, especially compared to the dollar, due to the different monetary policies of the two countries. The United States is tightening their belt with interest rate increases, while Japan’s poor economic growth is forcing the Bank of Japan to keep up a large stimulus program and maintain low interest rates. Based on the most recent data from Japan, we do not expect a change in the approach soon, which is why the yen will likely continue to lose positions.
In terms of the daily chart today we have a pivot point for the USD/JPY pair located at 113.45, with the pair currently trading above it and we expect it to remain that way. The daily resistance levels lie at 113.95 and 114.32. In case the yen strengthens, look to the supports at 113.08 and 112.58. The indicators of technical analysis are giving us a strong buy recommendation.
