USD/JPY Gains Fresh Bullish Bias – Broad-Based US Dollar Strengthens!
During Tuesday’s European trading session, the USD/JPY currency pair managed to stop its previous early-session losses, rising to a fresh session high just above the mid-107.00 level, mainly due to the strength of the broad-based US dollar, which was triggered by multiple factors. On the other hand, the modest pullback in the global equity markets, backed by the concerns of ever-increasing coronavirus cases, might extend some support to the safe-haven Japanese yen, capping the additional gains in the currency pair. Currently, the USD/JPY currency pair is trading at 107.67 and consolidating within the 107.25 to 107.78 range.
On the coronavirus front, the ratio of hospitalized people in Texas and California rose on Wednesday. Furthermore, the total number of US cases crossed the 2.9 million mark, and the number of deaths reported yesterday was 130,000, which eventually exerted downside pressure on the risk sentiment, providing for the safe-haven assets. As per the latest report, cases in Texas rose by 2.7% versus the 7-day average of 4.0%, while hospitalizations in Texas rose by 517, to a record 8,698. In the meantime, cases in Florida rose by 3.2% versus the 7-day average of 5.1%, and in California, cases rose by a record 11,529 cases. However, intensified concerns over a second economic lockdown in the US caused risk-off flows to continue to dominate the trading markets.
Despite the growing worries about the ever-increasing number of new coronavirus cases worldwide, the bullish trend in the currency pair seemed rather unaffected, due to the strength of the US dollar. However, the investors were worried that the recent sharp rise in COVID-19 infections might trigger renewed lockdown measures, which could halt the current economic recovery.
On the USD front, the broad-based US dollar managed to stop its previous day’s losses, rising sharply from the session’s low, mainly due to renewed safe-haven demand in the market, triggered by the fears of the second coronavirus wave. However, the US dollar upticks played a role in capping additional gains in the gold prices, as they both have a negative correlation, whereas, the dollar index, which tracks the greenback against a basket of six other currencies, was up by 0.2%, at 96.896, at 3:10 AM ET (0710 GMT).
Moreover, the uptick in the US dollar was further supported by Monday’s upbeat US ISM Non-Manufacturing PMI printout for June, which suggested that the US economy is starting to recover. In the absence of the major data/events due for release on the day, the market traders will keep their eyes on the USD price dynamics and coronavirus headlines, which could play a key role in influencing the intraday momentum.
Daily Support and Resistance
S1 106.52
S2 106.98
S3 107.17
Pivot Point 107.45
R1 107.64
R2 107.91
R3 108.38
On the technical front, the USD/JPY pair is testing the double top pattern at 107.828 resistance, while the support level holds at 107.280. A bullish breakout of 107.828 could lead the USD/JPY pair towards the next resistance area of 108. The 50 EMA suggests a bullish bias, along with MACD and RSI. Let’s look for buying trades over 107.820 and selling below the same today. Good luck!