Today we shall take a look at the USD/JPY pair. Last week the dollar’s weakness allowed the Japanese yen to push the rate to a nine-month minimum. However, this week the trend is stabilizing around the 103.40 level thanks to a renewed interest in safe havens.
The recent appreciation of the JPY against the US dollar has been largely due to investors perceiving the USD in a more dovish way than they see the yen. After all, recent policy changes by the Federal Reserve have signalled the central bank plans to loosen its policies to support the economic recovery from the pandemic in the United States. In addition, Joe Biden will soon begin his mandate as President of the United States, and he is also expected to implement measures to help the country overcome the coronavirus. Investors are already used to the situation in Japan, which is way less volatile than in America, making the yen prone to overtaking the dollar whenever the USD is in trouble.
The deciding factor for the USD/JPY is the type of sentiment that is most common among investors. Thanks to the development and approval of Covid-19 vaccines (and the other pressures mentioned above), we observed the dollar slumping to multi-year lows in the past month or so. However, this week the markets are in chaos again due to the discovery of a new strain of coronavirus in the United Kingdom. The mutated virus is more highly contagious, causing concern that the current pace at which countries are handling vaccinations is too slow, and that they are not going to be able to neutralize the pandemic. This has strengthened the suspicions that the world will take months yet to shake off the coronavirus, even with vaccines becoming available. The resulting panic has helped the dollar recover some of its lost positions this week.
In terms of the daily chart, we have a pivot point for the pair located at 103.48, with the pair trading below it currently. The support levels lie at 103.07 and 102.84, while the resistances are located at 103.71 and 104.12. The indicators of technical analysis agree in strongly recommending a sell position in the daily term.
