Today we shall take a look at the USD/JPY pair. Since the end of February there have been major changes in the trend of this pair: it switched to a sharp bullishness that has not waned. Today we find the exchange rate of the USD/JPY at its highest level since June 2020, just below 109.
As we commented in our previous review of this pair, right now the Japanese yen finds itself losing positions against the dollar through no faults of its own. Despite a recent increase in the seven-day moving average of Covid-19 infections globally, the pandemic is calming down. As a result, investors’ hopes of an economic recovery this year have grown, also boosted by improving fundamentals out of the US, the UK, the EU, and even Japan. Thus, there has been next to no demand for safe havens like the Japanese yen, which is why the rate of the USD/JPY was able to climb to a high last observed last summer. If the current market conditions hold, we do not see the Japanese yen strengthening anytime soon.
Meanwhile, the US dollar has benefited from the current market situation. Thanks to investor optimism about an economic recovery, the yields on US Treasury bonds have been increasing for weeks, the curve steepening sharply. Even though in the past the reserve currency has acted as a safe haven, now it is benefiting from the improving economic fundamentals in the United States, or the so-called reflation trading. The recent approval of Joe Biden’s $1.9 trillion stimulus bill and the reluctance of the Federal Reserve to tighten monetary policy have further solidified the opinion of investors that the US economy will recover before anyone else’s and that the dollar will remain the strongest currency in the world.
In terms of the daily chart, we have a pivot point for the pair located at 108.70, with the pair trading slightly above it currently. The support levels lie at 108.45 and 108.06, while the resistances are located at 109.09 and 109.34. The indicators of technical analysis agree in strongly recommending a buy position today.
