Today we shall take a look at the USD/JPY pair. Just five days ago the trend seemed to be going in favor of the Japanese yen, dropping to the lowest level in nearly a month, but now the exchange rate rebounded from there and we see some moderate bullishness again.
The Japanese yen had a moment last week when pessimism seemed to dominate market sentiment. For a time, investors were once again interested in safe haven assets, which is a rare sight in 2021, a year that so far has been all about economic recovery worldwide. But the spread of the Delta variant of Covid-19 is once again raising concerns about future outbreaks and lockdowns in countries and regions with low vaccination rates, and that fear gave the yen a fighting chance, at least for a bit.
But whatever advantage the yen had, it couldn’t last because the dollar is receiving a lot of support due to expectations of a robust and speedy recovery in the United States. This week the USD is fed by hopes that today’s inflation data will show a higher increase than planned, which is going to serve as motivation for the Federal Reserve to consider some kind of hawkish action, most probably tapering asset purchases, earlier than planned. Thus, the CPI readings today will be of major importance and can significantly strengthen the dollar, or weaken it, if they fail to meet the target levels. But so far inflation has been exceeding the expectations, at least in the past few months.
In terms of the daily chart, we have a pivot point for the pair located at 110.25, with the pair trading slightly above it currently. The support levels lie at 110.09 and 109.82, while the resistances are located at 110.52 and 110.68. The indicators of technical analysis strongly agree in recommending a sell position today.
