Today we shall take a look at the USD/JPY pair. Since the end of March, the pair has tested continuously lower minimums, indicating that the overall trend for the past two months is a downward one.
The outlook for the Japanese yen is gradually improving, though none of this is thanks to any domestic developments or actions by the Bank of Japan. The simple truth is that global risks are rising. According to the latest estimates, the recession that the coronavirus pandemic will cause globally will be worse than the aftermath of the 2008 financial crisis. In addition, Donald Trump has once again begun taunting China, this time with accusations about the origins of the coronavirus. Thus, the trade war is once again in the spotlight, even as the coronavirus has not fully left the headlines. Too many things to worry about means that investors are interested in the Japanese yen again, which is a safe and reliable asset. The growing demand means a higher price for the JPY.
It is also true that the US dollar is a well-liked safety investment tool as well and normally benefits from such times of market stress. One could even argue that the JPY and the USD were equally affected by the Covid-19 pandemic in terms of demand. However, the trade war is an issue that has a much more direct impact on the USD, thus pushing investors to prefer the yen at present. It will be a hard-fought battle between these two safe assets, but at least for now, the Japanese yen is slowly but surely appreciating against the US dollar.
In terms of the daily chart, we have a pivot point for the pair located at 106.62, with the pair trading right at it currently. The support levels lie at 106.56 and 106.37, while the resistances are located at 107.01 and 107.27. The indicators of technical analysis strongly recommend a sell position in the daily term.
