Today we shall take a look at the USD/JPY pair. After spending nearly two months in a very narrow trading range, the rate of this pair is finally exhibiting a clear trend - a bearish one, at that. It is currently at a four-month minimum.
At the moment the best explanation for the pair’s bearishness is that the Japanese yen is taking advantage of the dollar’s weakness. Indeed, there are no new domestic factors from Japan to influence the yen. There are some factors in favor of safe havens, though. For instance, the US and China closing each other’s consulates last week reminded the markets of the never-ending tension between the world’s two largest economies. US President Donald Trump also made statements regarding abandoning the phase-one trade agreement with China. If the latter comes to be, the markets will be seriously shaken. After all, the US-China trade war was the main source of negativity for the markets before the coronavirus appeared. In this context, investors are once again putting their faith in safe havens but this time around they seem to prefer gold and the JPY over the dollar.
The US dollar has fallen out of favor as a safety asset due to domestic sources of volatility. The coronavirus pandemic is still raging in full force in the United States, despite a brief period of lockdowns in April and May. Fundamental reports are beginning to catch up with the seriousness of the situation and are no longer as impressive as they used to be at the beginning of the outbreak in the US. Thus, many are worried that the United States will take longer than expected to recover economically. In addition, Presidential elections are coming up in just four months. Together, these factors are making the dollar too volatile, too prone to sudden shifts. Because of that, it is no longer the most reliable safe investment option on the markets and investors are losing interest in it.
In terms of the daily chart, we have a pivot point for the pair located at 105.56, with the pair trading slightly above it currently. The support levels lie at 104.91 and 104.47, while the resistances are located at 106.01 and 106.65. The indicators of technical analysis are unanimous in strongly recommending a sell position in the daily term.
