USD/JPY Choppy Session Continues – Stronger Dollar Sentiment Plays
Arslan Butt • 2 min read
The USD/JPY pair closed at 105.960, after placing a high of 106.201 and a low of 105.705. Overall, the movement of the USD/JPY pair remained bullish throughout the day. The US dollar edged higher on Monday, following Friday’s better-than-expected employment report. However, gains in the US dollar remained limited, as doubts regarding the US economic recovery remained on board.
The US Dollar Index, which tracks the greenback versus a basket of six currencies, was up on Monday, close to the93.5 level. The upward trend in the US dollar was backed by the move by US President Trump, who signed executive orders related to COVID-19 economic relief. Trump kept his promise to take executive action if the US Congress failed to reach consensus over the latest stimulus package. He signed four executive orders over the weekend, including the order to provide an extra $ 400 per week in unemployment payments, similar to the previous stimulus package in which $ 600 per week was passed.
However, these orders still need to be approved by the US Congress, as authority lies with the Congress. Meanwhile, over the weekend, White House officials and congressional Democrats expressed their willingness to compromise on another stimulus package, in order to help the economy to recover from the coronavirus crisis. However, no talks have been planned as yet, and this weighed on the market sentiment, keeping the US dollar in demand.
On the macroeconomic data front, the JOLTS job Openings for June rose to 5.89M compared to the projected 5.30M, lending further support to the US dollar, and pushing the USD/JPY prices even higher. In contrast, the Japanese traders were enjoying a holiday on the day. On the US-China front, the Governor of China’s Central Bank said on Monday that China would continue to fulfill its part regarding the Phase 1 trade deal with the US. He gave his assurance that despite the worsened tensions between the two countries, China would comply with the promises it had made for the Phase 1 deal.
The US Trade Representative, Robert Lighthizer, and the Secretary, Steven Mnuchin, are expected to hold a video conference with Vice-Premier Liu He this week, in order to evaluate the implementation of Phase 1 of the trade deal. China’s efforts to fulfil its part in the Phase 1 deal, despite the rising tensions, reflect the dragon nation’s intentions to prevent direct confrontation between the two countries. The deal requires China to purchase an increased amount of US farm products and services, and to protect intellectual property rights.
The upcoming meeting between both countries raised the risk-on market sentiment and helped the USD/JPY pair to post gains on Monday. However, the gains remain limited, as a Chinese jet fighter crossed the median line of the Taiwan Strait, possibly in response to US Health Secretary Alex Azar’s visit to Taipei, according to the Defense Ministry of Taiwan.
China tends to become angry over any form of American recognition of the island nation that China has claimed as its own. The tensions in Taiwan have developed since the US and China began to clash over the Hong Kong situation.
Daily Technical Levels
Pivot point: 105.95
The USD/JPY pair is trading at the 106.082 level, holding below an immediate resistance level of 106.486 and a support area of 105.620l. The 50 periods EMA is supporting the bullish bias in the USD/JPY. On the lower side, violation of the 105.600 level could add selling until the 104.896 level. Let’s consider selling below 106.486. Good luck!