Japanese Yen Is Still the Safe-Haven Currency

  • The 107 mark is decisive whether the Yen will appreciate more against the dollar
  • With the spread of the pandemic, the Yen is still the safest haven against most of the other currencies
  • The US dollar gains some power amid hope of reopening in June.

USD/JPY is one of the pairs that traders always keep an eye on. The Yen is considered a safe-haven currency in any political tension or disaster.

During this global pandemic disaster, Yen could display some interesting patterns to give opportunities for traders to collect some pips.

Technical Analysis:

Monthly Time Frame:

USD/JPY trendline - 1M

On the monthly time frame the Yen, has been making a downward movement since 2015.

A triangle has formed, where the price tried to break the flat side (Red Horizontal Line) three times to the downside. A white downtrend is displayed where the price failed to breach it twice (Yellow Circles).

The monthly chart is showing that the Yen is more powerful than the US Dollar, in which the USD/JPY dropped more than 24% in value over the last five years.

The chart is marking two dojis within the previous two months, this type of candlestick reflects that neither the buyer nor the sellers are taking control of this currency.

Gold and USD/JPY have an inverse correlation

This chart shows us how gold and USD/JPY have an inverse correlation. Both the Yen and gold are considered safe-haven instruments, which investors rush to buy in crisis. Note that when the gold depreciates, the Yen also depreciates, which leads to the USD/JPY appreciating, and the opposite is true.

4-Hr Time Frame:

Have a look at the smaller time frame; two marks hedge the price of USD/JPY. The 107 and 109.40 levels are considered key levels for this currency. 

Another triangle is seen. In general, with an asymmetric triangle, it is impossible to know in which direction the price will break out of it.

Two directions could be next, but the downside is limited by the 107 level, which is major support. On MACD, a cross is likely to happen between the red and blue signal. If this occurs a downward movement will likely begin by breaking the lower side of the triangle.

Fundamentals Analysis:

The news is one of the factors that a trader should look at along his technical analysis. Good news is coming from the US; the Gilead Sciences, a pharmaceutical company, is developing a promising vaccine against the coronavirus.

The firm’s shares jumped by nearly 8% on Friday as some details leaked about the clinical trial. In turn, the US dollar appreciated against the Yen, but at closing, it lost steam and stayed below the 108 Yen level to the dollar.

As well, the dollar experienced a rally upward the whole week with the depreciation of oil prices. The greenback is considered a safe-haven in times when Oil loses value.

On Thursday, the prime minister of Japan announced a state of emergency and asked the Japanese citizens to decrease the person to person contact, as per Japan Times.

The country announced 181 new cases on Saturday, and 201 on Friday, the highest since the beginning of the pandemic.

Next week, the price of USD/JPY most probably will range between the borders of the triangle before deciding in which direction the currency will move.



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