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In May, USD/JPY has been trading in a choppy range, above its April low and supported by a trendline drawn from its January low. As long as this trendline holds it can be argued that USD/JPY is still in an uptrend. The short-term outlook, however, could bring a few complications given the continued COVID-19crisis in Japan. While this may lend some short-term support for the safe-haven JPY, economists at Rabobank would be looking at dips in USD/JPY as an opportunity to establish a long position.

USD/JPY is still trending higher

“While the number of covid cases in Tokyo is reportedly falling in response to measures taken to control the virus, hospitals in Osaka are reportedly running out of beds. This news, coupled with the impact of the pandemic in other countries in the region, is evidence of the continued prevalence of the crisis.”

“Due to its function as a safe haven currency, the JPY has a tendency to be driven by global risk sentiment rather than specific domestic events. While there is a possibility that the fourth wave of the virus in the region may lend a little support near-term, price activity in the last few weeks suggests that safe haven buying of the JPY this is likely to be limited as long as optimism regarding the recoveries in US and Europe remains in place.”

“We would be looking for any dips below trendline support in the USD/JPY 108.60/70 area as buying opportunities.”