Today we shall take a look at the USD/JPY pair. Considering that this is a pairing of two safety haven assets, the rate has been somewhat erratic, with lots of ups and downs in May. This week the exchange rate is moving within a downward wave.
Like we have shared in other recent reviews of this currency pair, the Japanese yen is not giving the markets much to be excited about. Though Japan’s bout with the coronavirus has not been as serious as it was in countries like the US or the UK, it is by far the slowest G7 country in terms of vaccinations, so the Japanese economy may continue to be pressured by regional lockdowns now and again for the rest of the year while other economies recover. This automatically puts the yen on the back foot, especially if risk appetite remains so high. Still, there are some fears about inflation in the US overshooting the targets, which could drive short-term interest in the JPY, but overall the yen appears to be set for weakness, at least compared to the US dollar.
This week will be big for the US dollar. The most important release to look forward to are the May non-farm payrolls, which will drop on Friday. Last month they caused quite a commotion, so it is very likely that the dollar at present is trading in a subdued way in anticipation of Friday’s data, not to mention some PMIs and jobless reports that will come in the days leading up to it. Amid all of the fundamental pressure and volatility, the reserve currency might give up some ground to the JPY, at least until the reports are out and investors know what market situation they are dealing with.
In terms of the daily chart, we have a pivot point for the pair located at 109.61, with the pair trading below it currently. The support levels lie at 109.28 and 109.01, while the resistances are located at 109.87 and 110.21. The indicators of technical analysis agree in strongly recommending a buy position today.
