Today we shall take a look at the USD/JPY pair. Last Tuesday the pair climbed to the 107 level and has since been trading in a flat trend around that number, in the absence of factors to push it either up or down.
At the moment, there is not much that we can say about the Japanese yen that would be either positive or negative. The country, like the rest of the world, had its own episode of the coronavirus recently. Now the state of emergency previously announced by Prime Minister Shinzo Abe is coming to an end and things can go back to normal. Nevertheless, that normality for Japan was a de facto recession even before Covid-19 happened. Though the country experienced a far lighter outbreak compared to other regions, investors don’t have too much faith in the Japanese economy, which is why the yen is not as sought after at present. It is true that the JPY is a popular safe haven asset, but right now the US dollar is performing better in that regard.
The American dollar has in fact replaced the Japanese yen as investors’ top choice of a safe haven instrument. Thanks to stimulus plans by the government and the Federal Reserve, the USD enjoys ample liquidity, giving traders a much-needed sense of security in the current messy market situation. The most important factor in favor of the USD right now is the worsening in the relationship between China and the United States. The US is antagonizing China over both the coronavirus and the situation in Hong Kong, which is increasing investors’ uncertainty and boosting the demand for (and value of) safety assets like the dollar.
In terms of the daily chart, we have a pivot point for the pair located at 107.68, with the pair trading below it currently. The support levels lie at 107.57 and 107.45, while the resistances are located at 107.80 and 107.91. The indicators of technical analysis are confident in recommending a buy position in the daily term.
