Today we shall take a look at the USD/JPY pair. Last week the pair reached its lowest level in February but then rebounded from it and is now more or less where it began this month, trading within a bullish wave around the 105.40 level.
The reason why the course of the USD/JPY changed last week lies in action from the Bank of Japan. The latter confirmed that it is considering cutting interest rates even deeper into negative territory in order to support economic growth in the aftermath of the coronavirus pandemic. Recall that Japan was already struggling with a recession long before Covid-19 joined the fray. The Bank of Japan has maintained a dovish monetary policy for years, but the new crisis might require even more such measures. Despite a report on the GDP of Japan this week, which was better than expected, the yen did not manage to strengthen. At least for now, we expect that the trend will continue in a bullish manner before a new battleground flat area is established between these two safe haven currencies.
The US dollar at the moment is weakening against some currencies but the Japanese yen is not one of them. Recent inflation data from the United States disappointed investors. The Federal Reserve used the reports to remind the markets that its loose monetary policy is not going to change anytime soon, considering the lagging inflation and still troublesome situation on the labor market in the US. Still, that announcement pales in comparison with the Bank of Japan’s suggestion of cutting rates to even lower levels, which is why the USD took off against the yen so quickly and easily.
In terms of the daily chart, we have a pivot point for the pair located at 105.24, with the pair trading above it currently. The support levels lie at 105.05 and 104.74, while the resistances are located at 105.55 and 105.74. The indicators of technical analysis agree in strongly recommending a buy position in the daily term.
