Today we shall take a look at the USD/JPY pair. The erratic movement of this pair, which consists of two safe haven currencies, continues. Last week we saw both bullishness and bearishness in the pair and this week may also bring volatility.
At this point in time, there is nothing new to report on the Japanese yen that can change its circumstances. The Japanese economy has been in a recession since well before the coronavirus pandemic, as we have noted before. In addition, Japan’s slow vaccination program may also hinder its ability to recover, though it did not experience particularly heavy Covid-19 outbreaks, at least not compared to other G7 economies. The Bank of Japan, like most other central banks, is sticking to a dovish, supportive approach at the moment, to limited success (again, owing to the fact that the Japanese economy had deep-rooted problems even before the pandemic). The only thing helping the yen “strengthen” from time to time, like we saw briefly last week, is weakness in its counterparts. The demand for safe havens is quite low, so the JPY cannot count on that anymore.
Indeed, it is the US dollar that determines where the exchange rate of this pair will go. Last week it strengthened on optimistic jobless data, but then weakened after the non-farm payrolls failed to meet the target for the second month in a row (especially because the target in May was set considerably lower than the April forecast). Thus, the USD/JPY rate depends entirely on whether the dollar is stronger or weaker on any particular day. Due to the upcoming important CPI reports this week, the dollar might trade in a subdued manner in anticipation of the data.
In terms of the daily chart, we have a pivot point for the pair located at 109.36, with the pair trading right around it currently. The support levels lie at 109.08 and 108.90, while the resistances are located at 109.54 and 109.82. The indicators of technical analysis are very mixed today and are not giving a confident prediction, so we need to wait for stronger signals to decide how to trade this pair today.
