It has been a long time since we have considered another major and very interesting currency pair - the dollar/yen. And this pair is interesting because both currencies, depending on the situation, are protective assets. As we remember and know, during periods of aggravation of COVID-19, the US dollar was preferred as a safe-haven. However, recently, market participants decided not to put all their eggs in one basket and began to pay increased attention to two other safe-haven currencies - the Japanese yen and the Swiss franc. Another characteristic feature of the USD/JPY currency pair is that it probably reacts most sensitively to the most important world events. Especially to such important statistics as Nonfarm Payrolls and the Fed's rate decisions, the press conference of the head of the Federal Reserve, and the publication of the accompanying FOMC statement. But with the news from Japan, the pair behaves relatively restrained. Here are some details that someone may have forgotten.
Although today is already Wednesday, I will consider the USD/JPY price charts with a weekly timeframe. Despite the circled candle the day before last with a long lower shadow and fairly full bullish bodies, the continuation of the upward movement was not destined to take place. First of all, the change in price dynamics and the fall of the US dollar last week can be explained by the unfulfilled expectations of some investors. After the June increase in consumer prices and inflation at the July meeting, the Fed was waiting for clear signals about the near reduction of the quantitative easing (QE) program. However, this did not happen, and the "American" came under the pressure of sales. As a result, the dollar/yen fell to the level of 109.39 and ended last week at 109.69. Thus, the bears on the instrument returned the quote to the most important technical and psychological level of 110.00, and they had good prerequisites for continuing to bend their line. It is what is happening at the time of writing this article. The pair is trading with a decrease, near the support level of 109.09. The level is very important and significant, as well as the mark of 109.00. In case of a breakthrough of this support, there will be all chances to fall to the area of 108.20-107.90, where the level of 38.2 Fibo from the growth of 102.60-111.68, the orange 144 EMA, the blue Kijun line of the Ichimoku indicator and the black 89 EMA are concentrated. To return bullish sentiment for the pair, you will first need to pass up the red Tenkan line at 110.29 and consolidate higher.
On the daily chart, the downward scenario is unfolding in full swing. As a result of yesterday's decline, the pair came down from the Ichimoku indicator cloud, and now the pressure on it may increase. However, the bulls for the pair are not going to give up, and at the end of the article, the pair is growing, trying to return above 109.09 and prevent the breakdown of this important support level. As far as I understand, everything will be decided on Friday, after the publication of data on the US labor market, depending on the actual figures. The technical picture mostly suggests a downward scenario, but selling at an unbroken support level is far from the best trading solution. I recommend waiting for a corrective pullback to the area of 109.50-109.80, and when there are bearish reversal candles on this or smaller charts, open deals for sale. For any positioning options, I do not recommend setting large goals yet. Let me remind you once again that on Friday, anything can happen.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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