Today we shall take a look at the USD/JPY pair. The trend’s steep climb that began in late February started running out of steam last week, as the trend struggled with the 110 level, instead preferring to retract from it. Over the past seven days we’ve seen a more or less flat movement in this pair, with a slight bearish bias that could just be a price correction after the aggressive upward expansion.
The Japanese yen is at a crossroads. In terms of technical details, the USD/JPY has to deal with a key resistance at 109.85, the overcoming of which will unlock more space for the rate to climb. If the pair fails to overcome that level, a new flat channel may be established for the time being, until more significant factors come into play to tip the trend one way or the other. Last week the Bank of Japan announced that it will be winding down its aggressive bond purchases, as over the years this extreme dovishness has not done much to ease the deflation processes in Japan. Despite the ongoing pandemic and broader economic crisis, this slightly more hawkish stance by the BoJ may help the yen find a bit of support for now, especially considering that the Federal Reserve in the United States is determined to keep its own policies soft and supportive.
As for the US dollar, it continues to enjoy a wide range of supporting factors. The Covid-19 vaccination campaign in the United States is going well, with the pandemic gradually slowing down in North America. The positive results from a US clinical trial of AstraZeneca’s vaccine also indicates that it may soon become the fourth Covid-19 vaccine approved by the FDA, speeding things up further. Meanwhile, the stimulus funds are flowing, both from the Fed and from Biden’s administration. There simply aren’t any reasons to expect weakness in the dollar anytime soon.
In terms of the daily chart, we have a pivot point for the pair located at 108.77, with the pair trading below it currently. The support levels lie at 108.33 and 108.14, while the resistances are located at 109.03 and 109.21. The indicators of technical analysis are a bit mixed but lean towards recommending a buy position today.
