Hello!
At last week's trading, the dollar/yen currency pair showed growth, strengthening by 0.32%. It is worth noting that the situation in the world has not improved. Several countries have seen a surge in the second wave of COVID-19, including the United States itself. Also, mass riots related to the murder of a black American, George Floyd, have not subsided in the United States. Investors are also concerned about the tension in US trade relations with China and the European Union. Nevertheless, at last week's trading, market participants gave their preference to the US dollar, rather than the Japanese yen. In my opinion, the main significance here was technical factors. Let's figure it out.
Weekly
At the trading on June 22-26, the bears intended to continue the pressure on the quote, however, the landmark and strong level of 106.00 was not up to them. It was near this significant mark that the pair found strong support and began to actively recover.
The current trading started with a swing and is still going without a certain direction. It is understandable - at the beginning of the week, all the most important events are still ahead. Among a large number of macroeconomic statistics, it is immediately worth highlighting data on the US labor market, which will be published this Friday, at 13:30 (London time). I will describe this event in more detail closer to its release date, but for now, we will return to the technical picture and indicate the nearest goals at the top and bottom on the weekly timeframe.
So, if the upward dynamics continue, the USD/JPY bulls will have to once again test the strong resistance zone of 107.45-107.65 for a breakdown, where the maximum values of the last two weeks were shown. A break of 107.65 will open the way to a strong technical area of 107.92-108.11, where the lower border of the Ichimoku indicator cloud, the Tenkan line, and the 50 simple moving average passes. Do not forget about the important level of 108.00, which has repeatedly had a significant impact on the course of trading. Thus, we can assume that the closing of the current weekly trading above 108.11 will indicate the superiority of the bulls over their opponents and the subsequent growth, the goals of which will be: 108.44 (upper limit of the cloud), 108.86 (89 EMA) and 109.25, where a strong 144 exponential moving average passes. Only the breakdown of the 144 EMA will make it possible to retest the sellers' resistance at 109.85 and the most important psychological and technical mark of 110 yen per dollar.
To implement a bearish scenario for this currency pair, a true breakout of the level of 106.00 and the closing of weekly trading under this mark is necessary. If the downside players manage to complete this task, the road will open to another important mark of 105.00. Judging by the last weekly candle, with a fairly long lower shadow, I am more inclined to expect growth from USD/JPY.
Daily
In the daily timeframe, there is an extremely interesting picture, which indicates the uncertainty of market participants regarding the further price movement of this instrument. In particular, this is indicated by the last two daily candles with long shadows and insignificant bullish bodies. This is especially true for the Friday candle for June 26.
Now about the role of the 50 simple moving average, which acts as a very strong resistance. As you can see on the chart, the dollar/yen can not go up 50 MA, starting from June 15, that is, almost half a month.
At the moment, the situation for USD/JPY bulls is complicated by the presence of the lower border of the Ichimoku cloud, which passes at 107.23.
In turn, support is represented by the Tenkan line of the Ichimoku indicator, which runs at 106.77. Only a break of this mark and fixing under it will open the way to a strong support zone of 106.08-106.00.
Trading recommendations for USD/JPY:
As noted above, the last weekly candle showed that the bulls turned the situation around and took control of it. Although it is too early to draw definite conclusions right here and now, I am more inclined to expect the implementation of an upward scenario.
I recommend considering purchases after short-term declines in the area of 107.10-107.00. This week, we will return to this currency pair and, if necessary, make changes to this trading recommendation.
Good luck!
The material has been provided by InstaForex Company - www.instaforex.com