USD/JPY: Risk trade unable to gain a foothold

USD/JPY dropped to its lowest level in over two weeks on Friday but neither the 108.00 resistance or the 106.50 support have been challenged. The pair could accelerate the decline if breaches below the mentioned support, FXStreet’s Joseph Trevisani reports.

Key quotes

“Several states with rising Covid cases have paused or rolled back their opening plans and while the larger caseload is partially due to more testing and fatalities have only increased marginally in a few cities, hospitalizations are up and the crucial factor is time. The latency period for Covid complications and death is three to five weeks and that time is just starting. If business closures become widespread and mandatory then markets will likely reassess the current risk-on status of the dollar.”

“The Relative Strength Index has dipped into negative with the Friday drop below 107.00 but it is a weak indicator until the USD/JPY penetrates 106.50. All the moving averages have been crossed with this week's decline with the 21-day (107.23) now enhancing the resistance line at 107.25, the 100-day (107.69) behind 107.60 and the 200-day (108.39) fronting 108.50.”