Today we shall take a look at the USD/JPY pair. Last week we observed a lot of ups and downs in this pair, but it managed to retain its overall very high price levels and is still trading close to 114.
Where it comes to the Japanese yen, its position against the US dollar continues to be uncertain. The demand for safety assets has been lower lately, as a result of which the yen lacked any external incentives for growth. Domestically things remain largely unchanged, even though Japan now has a new government under the leadership of Prime Minister Fumio Kishida. He has vowed to continue to support the economy with ambitious stimulus measures, which is more or less what his predecessors tried to do. With the Bank of Japan also remaining dovish, the country is not going to see many changes and the JPY will be under pressure due to the abundance of stimulus and the BoJ’s ultra loose monetary policy.
On the other end of the spectrum lies the US dollar. Indeed, the reserve currency might strengthen significantly this week if the Federal Reserve does what the markets have been getting ready for over the past few months: a monetary policy tightening. The Fed’s monthly meeting starts today and the final decision will be announced at a press conference tomorrow. Up until recently, investors were all but certain that the Fed will start reducing its asset purchases in November, but some disappointments in several economic reports lately are making the markets a bit apprehensive. Still, if the Federal Reserve does take a more hawkish stance, expect the dollar to strengthen mildly; if the regulator does not taper bond purchases, the dollar can weaken more significantly.
In terms of the daily chart, we have a pivot point for the pair located at 114.12, with the pair trading below it currently. The support levels lie at 113.59 (overcome) and 113.25, while the resistances are located at 114.31 and 114.65. The indicators of technical analysis are mixed and we need to wait for a stronger signal before we can commit to a recommendation.
