During Tuesday's early European trading session, the USD/JPY currency pair succeeded in maintaining its previous session gains. They continued to gain positive traction around the above 106.00 level due to the upbeat market sentiment, backed by optimism, a potential vaccine, and treatment for the highly contagious coronavirus disease. The positive data on the US-China trade relations also exerted a positive impact on the market trading sentiment and undermined the demand for the safe-haven Japanese yen.
On the contrary, the broad-based U.S. dollar weakness, in the wake of low safe-haven demand in the market, becomes the key factor that capped further upside momentum for the currency pair. At this moment, the USD/JPY currency pair is currently trading at 106.31 and consolidating in the range between 105.88 - 106.38.
As we already mentioned, market trading sentiment gained positive traction from the optimism over a possible vaccine and treatment for the highly infectious coronavirus. Let me explain that the Trump administration is thinking fast-tracking an innovative COVID-19 vaccine for use in the United States before November 3 elections. As well as, the US FDA on Sunday declared emergency authorization to use blood plasma to treat COVID-19 patients. This, in turn, further boosted investors' confidence.
Apart from this, the reason for the upbeat market sentiment could also be associated with the latest positive statement from the U.S. Trade Representative's Office that both the U.S. and China see progress made on solving issues in phase one trade deal between the two countries despite multiple differences. On the flip side, the Dragon Nation also confirmed that both nations had a constructive conversation on the trade agreement. As per the keywords, "China says both sides agreed to continue pushing forward implementation of phase 1 trade deal."
Apart from this, the market trading sentiment is rather unaffected by the renewed uncertainties over the much-awaited fiscal package, which has fueled worries over the U.S. economic recovery. It is worth reporting that the U.S. Congress previously showed readiness for reaching an agreement over the latest stimulus measures, but afterward, he took a U-turn from his positive statement.
The upbeat market sentiment, the broad-based U.S. dollar failed to gain any positive traction on the day, as well as the losses could be associated with the doubts about the U.S. economic recovery ahead of Fed Chairman Jerome Powell's speech at Thursday's Jackson Hole symposium themed. However, the U.S. dollar losses became the key factor that kept the currency pair's gain limited. Whereas, the U.S. dollar index that tracks the greenback against a basket of other currencies dropped by 0.11% to 93.207 by 9:48 PM ET (2:48 AM GM
Moving ahead, the market traders will keep their eyes on the U.S. Federal Reserve Chairman Jerome Powell's speech at the Jackson Hole symposium, which is scheduled to open on Thursday. The U.S. August consumer confidence is due later in the day and will be key to watch. In the meantime, the USD moves and coronavirus headlines will also closely followed as they could play a key role in the currency pair.
Daily Support and Resistance
S1 105.28
S2 105.58
S3 105.77
Pivot Point 105.89
R1 106.08
R2 106.19
R3 106.5
The USD/JPY pair has violated the symmetric triangle pattern at 106 level, and now it's heading further higher towards the next resistance level of 106.620. The bullish marabou candle on the 4-hour timeframe suggests the odds of bullish trend continuation on the USD/JPY currency pair. At the same time, the RSI has crossed over 50 levels, which is now suggesting further chances of a bullish trend in the market. As discussed, the immediate resistance stays 106.600 level, but the bullish breakout of this level can extend the buying trend until 107. Let's consider taking a buying trade over 106. Good luck!