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Market Analysis – USDJPY

The US Dollar is declining against JPY today, developing the “bearish” momentum that had formed the day before and canceling out the results of the “bullish” start of the week when the instrument tried to retreat from its weekly lows. The movement is largely technical as traders are fearful of holding onto their gains after three full months of bullish movement. These traders are awaiting further market price to direct their position accordingly.

Even though the asset has slightly declined over the past 2 weeks, the momentum still remains in favour of the US Dollar overall. Over the last 24-hours, the US dollar is strengthening against its main competitors including the Euro, Pound, and Australian Dollar. Traders should also take note of the Dollar’s improved position since the 18th March where the US Dollar index has increased by almost 1.30%.

The US Dollar is under some slight pressure from the yield on US bonds, which has been showing negative dynamics over the past few days. In addition, investors are worried about the increasing price pressure against the background of significant injections of funds into the national economy to stimulate its recovery. However, the Federal Reserve is still taking a cautious position, considering the growth of inflation to be acceptable and reporting that it has all the necessary tools to control it in the future. Treasury, Janet Yellen, also agreed with Mr. Powell’s stance regarding a possible rise in inflation.

According to the Chairman, the economic recovery is progressing faster than expected and will intensify. Household spending is on the rise and the housing sector has fully recovered. Nevertheless, a number of sectors of the economy are still weak, unemployment is still high at over 6%, and the labor market is still far from pre-crisis levels. Therefore, according to Powell, the Fed will continue to provide assistance to the economy until a full recovery is certain.

Over the past 48-hours we can see the Japanese Yen is increasing in value against all major currencies including the Euro, Pound, and Australian Dollar. The bullish movement over the past two days is currently minor when looking at the magnitude of the bearish movement which started back October 2020. Traders will be evaluating the developments over the next few days to see if the currency is able to keep up momentum.

Yesterday, the Japanese government released another economic report, which lowered the assessment of exports, noting that they are growing at a slower pace than before. The slowdown is due to a decrease in demand for cars. It was also noted that the economy continues to grow, despite the current difficult conditions. Last night, it also became known that the Cabinet of Ministers has decided to allocate an additional 2.17 trillion Yen from reserve funds to financially support enterprises and households suffering from the long-term impact of the Coronavirus pandemic. 1.54 trillion Yen of this amount will be allocated to help restaurants, bars, and other catering establishments.

The Bank of Japan’s meeting minutes on the interest rate published today do not influence the dynamics of the instrument much. The Japanese regulator plans to keep the parameters of monetary policy unchanged until the market situation improves.

The price movement is currently moving slightly bullish when looking at the past 2-hours. Though the movement is currently no more than a retracement. It would be vital for the asset to breakout of the previous swing high (108.760) in order to see a change in trend. Looking at the Stochastic Oscillator, the price has formed a bullish crossover indicating bullish movement, however, it is important traders ensure the cross over does not drop back down. The moving averages are close to crossing over upwards, but the 30-day average price movement continues to indicate a conflicting indication. The support and resistance levels are stated below:

Resistance levels: 108.61, 109.00, 109.37, 109.84.

Support levels: 108.15, 107.78, 107.42, 107.00.

Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing investing advice or a recommendation, or an offer of or solicitation for any transactions in financial instruments or a guarantee or a prediction of future performance. Past performance is not a guarantee of or prediction of future performance.

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