USD/JPY Technical Analysis: When is it Possible to Buy?

Mahmoud Abdallah

The bears succeeded due to factors supporting them in pushing the US dollar against the Japanese yen towards the 108.83 support before settling around the 108.93 level. This was at the time of writing ahead of the most important event for the US dollar this week, which is the announcement of the minutes of the last meeting of the US Federal Reserve. The Japanese yen maintained its strong gains, despite fears of a double-dip recession in the world's third largest economy. The yen has been struggling this year 2021 as investors' appetite for safe-haven currencies diminished amid the global economic recovery and strengthening financial markets.

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The yen is a popular asset during turbulent times.

On the economic side and according to the Cabinet Office, Japan's GDP contracted at an annual rate of 5.1% in the first quarter of the year, worse than the average estimate of -4.6%. This is a decrease from the 11.6% revised support reported by Tokyo in the fourth quarter of 2020. The economic slowdown was supported by a decline in private consumption of 5.4%, while government consumption decreased by 6.9%. Moreover, on a quarterly basis, capital expenditures fell 1.4% in the January-March period, and external demand fell 0.2%. The GDP price index fell 0.2% year-on-year

This comes one day after the Japanese government confirmed producer prices rose 3.6% year-on-year in April, higher than market expectations of 3.1%. This was three times the figure reported in March. On a monthly basis, the producer price index increased by 0.7%. Among other data results, the Japan Machine Tool Makers Association (JMTBA) found that machine tool orders rose 120.8% in April, while the tertiary industry index jumped 1.1%.

All of these are signs of economic recession in general, and therefore the disappointing economic numbers have made market observers warn that this may turn into a double-dip recession, stemming from the application of the administration of Japanese Prime Minister Yoshihide Suga new restrictions for COVID-19 on half of the economy. This, according to financial analysts, could push the prime minister to pull the trigger for additional stimulus.

“If the state of emergency were to be extended, it would certainly increase the potential for deflation,” said economist, Yoshiki Shinki of the Dai-ichi Institute for Life Research in Bloomberg. Consumer spending is the largest missing part of the economy and it is difficult to predict because it depends to a large extent on the virus situation. ”

Regarding the efforts of the US administration to eliminate Corona, the country's top infectious disease expert acknowledged "confusion" after the Centers for Disease Control and Prevention said last week that fully vaccinated people do not need to wear masks in most cases, even indoors. "The problem and the issue is that we have no way of knowing who is vaccinated and who has not been vaccinated," Dr. Anthony Fauci told ABC News.

He says that it is "reasonable and understandable" that some companies and localities maintain the requirements for masks because they cannot be sure of an individual's vaccination date. But he says it is important to note that these measures protect the unvaccinated from one another, and that vaccines provide a high level of protection for those who have obtained them. Fauci also added that children who have not been vaccinated - including children under the age of 12 who will not be eligible for vaccination for several months - should continue to wear masks indoors. But he says that recommendation could change because the CDC is conducting more research and more Americans are receiving doses.

According to the technical analysis of the pair: On the daily timeframe chart, the performance of USD / JPY in a neutral position with more tendency towards the downside if it stabilized below the support level 108.85, which may increase selling operations. I see it as an opportunity to think of the purchase. The closest support levels for the currency pair are currently 108.65, 107.90 and 107.00, respectively. On the upside, the bulls will not control the performance without breaching the psychological resistance level 110.00, otherwise the stronger bears will dominate. The currency pair will be affected today by the extent to which investors take risks or not, following the announcement of the contents of the minutes of the last meeting of the US Federal Reserve

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Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.

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