Today we shall take a look at the USD/JPY pair. Despite a few hiccups last week, the pair continues to move within the bullish trend that began on February 23. It is currently trading around the 109.25 level, which is the highest since June 2020.
The Japanese yen has weakened significantly because of the lack of demand for safety assets at the moment. In fact, the financial markets are bursting with optimism. Fundamentals are improving in a number of countries, most notably in the United States, the biggest economy in the world. Despite being affected the most by the coronavirus pandemic, the US is recovering: Joe Biden got his stimulus bill approved and is also doing well on his promise of speedy vaccinations for everyone. And if the economy of the US recovers, this entails a global recovery as well due to how dependent the international markets are on America. As for domestic factors, the Bank of Japan is holding a meeting later this week where it may adjust its monetary policy. But for now, risk appetite remains the main driver for the JPY, and it is a negative one.
On the other hand, the American dollar is making great headway due, in large part, to the exact same factors. Though the USD used to act as a safe haven in the past and one might assume risk appetite is pressuring it, the dollar is in fact strengthening because it represents the largest economy that will also be the first to shrug off the damage from the coronavirus pandemic. Notably, the Federal Reserve is beginning its own monetary policy meeting today, which will last till tomorrow. On Wednesday we will hear from Chairman Jerome Powell if there are to be any adjustments, considering the recent improvements in the situation in the US. The outcome of the meeting will likely have a strong impact on the dollar but only if there are hints of hawkishness in Powell’s speech.
In terms of the daily chart, we have a pivot point for the pair located at 109.14, with the pair trading slightly above it currently. The support levels lie at 108.92 and 108.69, while the resistances are located at 109.36 and 109.59. The indicators of technical analysis agree in strongly recommending a buy position today.
