Today we shall take a look at the USD/JPY pair. Since the beginning of December, the exchange rate of this pair has been moving within a tentative bullish wave, with only a small retreat this week. The rate remains around the 113.70 level, the second highest price this month.
There isn’t too much affecting the Japanese yen at the moment. The general situation with the Japanese economy has been clear to investors for a long time, so no surprises there. This week, more specifically on Thursday, there will be CPI data from Japan. Overwhelming growth is not really expected, but investors will be curious to see if the global trend of rising inflation rates is affecting Japan. After all, the Bank of Japan last week announced that it would end its asset purchases in March 2022, a move copied from central banks in countries where inflation is indeed rising to worrisome levels. As for the bit of resistance we are seeing this week from the JPY, it is most likely due to the pessimistic mood of market participants, who are exhibiting risk aversion tendencies right now. Safe havens will likely stabilize a bit this week.
As for the US dollar, some new fundamental factors are at play. First of all, the Omicron Covid-19 variant has made it to the United States, where daily infection rates are currently quite high (approaching the Delta levels from August this year). There is the threat of new lockdowns, but even without them, many people would still have to stay at home in quarantine. A massive Covid-19 outbreak has negative economic implications even without a formal lockdown. In addition, US President Joe Biden’s infrastructure stimulus package (Build Back Better) has met resistance from within the Democratic Party, which might put it on hold indefinitely. The prospect of less stimulus going into the US economy is hurting its growth prospects. The dollar still has great long-term prospects, but right now its path is a little rocky while investors adapt to the current developments.
In terms of the daily chart, we have a pivot point for the pair located at 113.55, with the pair trading above it currently. The support levels lie at 113.36 and 113.13, while the resistances are located at 113.78 and 113.97. The indicators of technical analysis agree in recommending a buy position today.
