In today’s review of the pair, we will focus on the technical component, as well as identify the most significant fundamental factors that can affect the price dynamics of USD/JPY. But first, let’s talk about the status of the Japanese yen and the US dollar. I believe that it is not news to anyone that during the coronavirus crisis, investors prefer the US dollar as a protective asset, especially when the rate of infection increases. In my opinion, this is due to the blockages and restrictions imposed in countries that are necessary to curb the spread of coronavirus infection. Naturally, these methods of combating COVID-19 cause serious damage to the economic pace of development both in individual countries and in the world as a whole. In my personal opinion, it is the economic component that makes investors go to the US dollar, which continues to be the main reserve currency and a protective asset under certain circumstances. As for the Japanese yen, the demand for it increases significantly during periods of geopolitical and political crises, as well as during natural disasters and other negative moments. However, this does not mean that in economic crises, the yen remains without the attention of market participants. Not at all. In general, of all the safe-haven currencies, the yen is the most powerful and in demand. Now for the fundamental events. In short and to the point, of all the numerous reports that are scheduled for the trading week that started today, the most important and significant for investors will be data on the US labor market, which will be published on Friday, at 13:30 London time. Now we turn to the technical analysis and start it with the results of the week that ended.
As noted in previous articles today, the US dollar strengthened against all major competitors at the auction on March 22-26. In particular, the Japanese currency, paired with the dollar, suffered quite serious losses. This can be judged by the large bullish candle that appeared on the weekly chart following the results of the last five trading days. At the same time, the previous doji candle, which had a reversal character, was completely absorbed by the growth. This factor undoubtedly indicates the strength of bullish sentiment for USD/JPY, however, the main task for the players to increase the exchange rate has yet to be solved. Of course, we are talking about the most important psychological and technical level of 110 yen per dollar, which the bulls of the pair have yet to test for a breakdown. I should immediately note that, according to long-term observations, a fierce struggle of the opposing sides is unfolding around this mark, so we can hardly expect that the level of 110.00 will pass easily and immediately. If the results of the current weekly trading show a reversal pattern of candle analysis with a long upper shadow and a closing price below 110.00, this may signal the end of the pair’s growth and its reversal in the south direction. In the case of the formation of a confident and full bullish candle with a closing price not only above 110.00 but also above 110.20, the growth of USD/JPY is likely to continue and may get a second wind.
On the daily chart of the pair, we see that the red line of the Ichimoku Tenkan indicator has already been passed up, however, the strong resistance of sellers at 109.85 remains unbroken. Today, the quote has already rolled back to the previously broken resistance of 109.37, after which the pair rapidly reduces the losses incurred before and at the end of the article is approaching the opening price of 109.71. The breakdown of the resistance of 109.85 will be the bell for a further rise to the area of 110.00-110.20, where the future fate of the USD/JPY pair will be decided. If we go to the trading recommendations, then I consider the main purchase, but the place to open long positions is far from the most successful, since when testing for a breakdown of the strong price resistance zone of 109.85-110.20, there may be rebounds down, and very significant ones. I believe that everything can be decided on the last day of weekly trading, after the publication of American labor statistics. In the meantime, I recommend looking for options for purchases after short-term declines in the price zone of 109.60-109.45. The confirmation signal for opening buy trades will be the appearance of bullish candlestick analysis patterns at this or smaller time intervals. At the same time, we keep in view the price behavior in the area of 109.85-110.20. If bearish candlestick patterns start to appear here, we can try to sell, but so far only based on a corrective pullback.
The material has been provided by InstaForex Company – www.instaforex.com
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