Today we shall take a look at the USD/JPY pair. Ever since last week a new downward wave began within the trend of this pair. Right now it is trading at a 5-week low around 109.38.
At the moment, the Japanese yen seems surprisingly better positioned than the US dollar to make gains within this currency pair. The yen has long been investors’ favorite safe haven asset and now that risk aversion is the dominant mood in the market, the JPY is looking cool again. The reason for the shift in sentiment is the rising fears over a new wave of coronavirus infections. The delta variant, which troubled India this spring, has now spread around the globe and infections are rising in the United Kingdom, the United States, Australia, Japan, Indonesia, and other countries. Thus, the markets now fear that a new round of lockdowns might be necessary this fall, which is going to hurt the global economy further. On this background, it seems prudent to invest in safety assets like the Japanese yen now while they’re still relatively cheaper, thanks to months and months of optimism and recovery preceding this moment.
It is also true that the US dollar has safe haven qualities as well. In fact, during the worst of the coronavirus pandemic, the dollar enjoyed more popularity than the yen. But right now, perhaps due to some fatigue with the JPY’s weakness (whereby investors got tired of betting against it) and also fears that the outbreak in the United States will be severe due to rising anti-vax sentiments, the dollar is on the losing end right now. It is still going to perform great against risky assets, but the yen is safer than even the USD right now.
In terms of the daily chart, we have a pivot point for the pair located at 109.54, with the pair trading below it currently. The support levels lie at 109.04 and 108.57, while the resistances are located at 110.01 and 110.51. The indicators of technical analysis strongly agree in recommending a sell position today.
