Today we shall take a look at the USD/JPY pair. Last week the pair took off massively and managed to climb above 113 in the last couple of days, which is the highest level since December 2018, so an almost three-year maximum.
As we have commented in the past, the Japanese yen does not have many factors that play in its favor right now. The situation in the Japanese economy is rather dire, considering the country was in a crisis long before the pandemic began. The Bank of Japan is one of the most dovish-minded regulators in the world, but its loose policies have not done much to improve the situation in Japan. It is true that the yen has experienced some strength here and there, whenever risk aversion among investors was high. The JPY is a safe haven asset, after all. Nevertheless, so is the US dollar, and due to the large divergence between the policies of the Federal Reserve and the Bank of Japan, the yen is simply not the best performing safety asset.
The advantage of the US dollar can easily be confirmed by technical tools. The USD/JPY gave a golden cross signal last week - a rare occurrence that indicates the trend has turned confidently bullish. This is going to give the dollar a chance to test other maximums from 2018 pretty soon. In addition, as mentioned above, the Federal Reserve still seems very likely to begin tightening monetary policy in the United States long before the Bank of Japan does, despite the disappointing NFP report last week. Thus, the bias for the dollar is bullish.
In terms of the daily chart, we have a pivot point for the pair located at 112.96, with the pair trading above it currently. The support levels lie at 112.49 and 111.68, while the resistances are located at 113.78 and 114.24. The indicators of technical analysis agree in strongly recommending a buy position in the daily term.
