Today we shall take a look at the USD/JPY pair. One tendency we have seen so far in June is that the JPY managed to rally against the dollar to a low previously seen in early May. Over the past seven days the pair has moved very little and generally stays in the 106.90-107.40 range.
It is important to note that the recent strengthening of the Japanese yen against the dollar did not result from any factors in favor of the yen, as much as from the dollar’s own weakness. The first couple of weeks of June were a time when investors were much more risk-positive, staying clear of safe haven assets. Both the yen and the US dollar are such safety currencies, but lately the dollar has been more so than the yen, which is why it was hit harder by the lower demand for safe havens. But the inability of the yen to push significantly further down against the USD shows that it is also pressured by the same factor and can only move as much as the dollar allows it to. Again, the USD/JPY trend depends almost entirely on the USD, with the yen playing it passive here.
The dollar did indeed suffer a brief period of weakness when investors gave some love to riskier assets like the euro or the NZD. However, big issues are once again on the horizon and if they manage to swing investors towards a greater demand for safe havens, the USD will come out on top again. The most important of these events is the development of a second wave of the coronavirus pandemic. Countries and states that already experienced the peak of their respective outbreaks are seeing new cases after they reopened and tried to go back to normal. This is raising the concern that new lockdowns might be imposed to curb the second outbreak, which would harm the global economy (which is already in recession) even more. Due to such conditions of market uncertainty, the USD is likely to strengthen for the time being.
In terms of the daily chart, we have a pivot point for the pair located at 106.89, with the pair trading above it currently. The support levels lie at 106.76 and 106.63, while the resistances are located at 107.02 and 107.15. The indicators of technical analysis are strongly recommending a sell position in the daily term.
