Today we shall take a look at the USD/JPY pair. Despite a slight downward correction during the weekend, now we are seeing the resumption of the upward movement of this pair that was taking place throughout the second half of September. Yet, the pair remains around the 105 level, which is significantly lower than the average for this year.
The Japanese yen is currently relying entirely on risk appetite, or more specifically, the lack of it among investors. Many events have shaken the markets lately, from the lack of proper stimulus plans in the United States, through Trump’s contracting the coronavirus, to the upcoming US presidential elections and the second wave of the pandemic around the globe. Thus, there are many possible sources of pessimism that can boost the yen. It is somewhat difficult to say how much each factor is priced in every day, so the most reliable advice at the moment would be to pay attention to the S&P 500 index, which has a negative correlation to the yen. If expectations about the economy are too grim in the US and if the House of Representatives’ stimulus bill fails, the S&P 500 can sink, boosting the Japanese yen in turn, and vice versa.
While the US dollar is also commonly considered a safety asset like the yen, the fact that most of the sources of market uncertainty are actually coming from within the United States is proving a bit challenging for the dollar. If the economic slowdown caused by the pandemic and exacerbated by the lack of stimulus in the US has global consequences, then the dollar will be on an even field with the yen and indeed serve as a safe haven. But if the above-mentioned factors have more of a domestic impact, then the US dollar will be pressured and weakened as a result. Today’s economic calendar is not very rich for the dollar, but tomorrow the minutes from the Federal Reserve’s most recent meeting will be released, which will definitely have a strong impact on sentiment, pushing either on or off risk.
In terms of the daily chart, we have a pivot point for the pair located at 105.60, with the pair trading around, if slightly below it currently. The support levels lie at 105.39 and 105.08, while the resistances are located at 105.91 and 106.12. The indicators of technical analysis agree in strongly recommending a buy position in the daily term.
