Today we will analyze another major and quite interesting currency pair - the dollar/yen. Let me remind you that both currencies, depending on the situation, are perceived by market participants as protective assets, and this is the main highlight of this trading instrument.
Weekly
As already noted in yesterday's articles, the Japanese yen was the only major currency that showed a strengthening against the US dollar at the auction on March 15-19. However, the strengthening was very modest, and the main technical point is the candlestick model itself, which can be considered a reversal. Also, the fact that the pair did not reach the previous high at 109.85, but only reached the level of 109.37, indicates that the strength of the bulls on the instrument is at an end, or even completely dried up. It is also necessary to take into account the fact that the USD/JPY bulls cannot overcome the red resistance line of the long-term downward trend, and this also does not add points to their piggy bank. The quotes started trading on the current five-day period with an increase, but the pair already met quite strong resistance from sellers at 108.96 and, at the time of writing this article, is rapidly losing the positions won before.
I have repeatedly noted in previous articles on this instrument that the mark of 109.00 is extremely important and strong for passing from the first time. The current situation once again confirms this assumption. For the pair to continue to grow, the "Bullish Engulfing" pattern should appear at the end of this week, that is, the previous candlestick should be completely absorbed along with its upper shadow. But this will not give a clear answer regarding the bullish prospects for USD/JPY. This requires a true breakdown of the levels of 109.85 and 110.00, with a mandatory consolidation above the last mark. In the meantime, yesterday's growth seemed to be a good option for opening deals for sale at higher prices. Although I do not think that the time for opening sales is irretrievably lost, let's see what picture is observed in a smaller time frame.
Daily
Given that the Japanese yen is the main protective asset, the events in Turkey could not but cause demand for the yen as a safe-haven currency. As for the global situation with the continued spread of COVID-19, investors tend to prefer the US dollar. However, looking at the daily chart, it is hardly possible to consider these events as key. Most likely, we are seeing a classic technical consolidation before a strong and directional price movement. Judging by the previous weekly candlestick, there is more chance for a downward trend scenario. The daily chart clearly shows the range of 109.37-108.60, in which USD/JPY is traded. I believe that the exit from this price range will help determine the further direction of the price, but for now, we will move on to the trading recommendations for USD/JPY.
In the author's personal opinion, the main trading idea for the dollar/yen pair in the current period is considered to be sales, which are better and technically more reasonable to consider after short-term rises in the price zone of 108.85-108.95. If the pair returns above the level of 109.00 and is fixed above it, changes may be made to this forecast. I recommend opening purchases at the breakdown of the resistance at 109.37 or after the actual breakdown on the rollback to this mark. Long positions at lower prices can be found after the decline at 108.40. Nevertheless, I consider sales to be the main trading recommendation for USD/JPY.
