Today we shall take a look at the USD/JPY pair. Since last week the pair has been trading around the level of 107, without any strong movement either up or down.
The overall outlook for the Japanese yen remains neutral. The JPY is a popular safety asset, after all. The current market stress caused by fears of a second wave of the coronavirus pandemic and a renewed trade war between the United States and China are creating demand for safe havens like the yen. However, the US dollar is a better performing safety currency. The yen is likely to appreciate against other major currencies, but the dollar is proving much more resistant due to its great liquidity. News from Japan, including the fact that the economy is officially in recession, is having next to no impact on the yen. Unless the dollar weakens, the yen will struggle to appreciate significantly.
At present, there are no factors that could weaken the US dollar. The reserve currency previously weakened slightly when investors were worried that we might see negative interest rates in the United States next year to stabilize the economy. However, the Federal Reserve has so far firmly denied this approach, which is keeping the USD strong. Moreover, the recent spike in tensions between the US and China over China’s role in the spread of the coronavirus is sending waves of panic in the financial markets. If this tension persists, the dollar will most likely remain strong.
In terms of the daily chart, we have a pivot point for the pair located at 107.30, with the pair trading above it currently. The support levels lie at 107.09 and 106.82, while the resistances are located at 107.56 and 107.78. The indicators of technical analysis are confident in recommending a buy position in the daily term.
