USD/JPY analysis and issues
- Japan’s inflation continues to put pressure on the Bank of Japan to change policy.
- Emphasis on US economic data including core PCE.
- Although the yen started this week solidly, upside risks still remain.
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Basic background of the Japanese yen
The Japanese yen ended the trading week on a subdued note due to the US Thanksgiving hangover, but Friday contained some important information to factor into the Bank of Japan’s (BOJ) analysis. Headline inflation is again 2% Exceeding expectations and exceeding them 3%. Remember that the Bank of Japan has consistently emphasized the fact that it wants sustainable public finances. +2% Inflation therefore increases the likelihood of policy change. A hawkish move would support the yen and end negative interest rate policy.
The Israel-Hamas war needs to be closely monitored as the Japanese yen could find additional support due to safe asset demand if the situation escalates. Next week (see economic calendar below) will focus more on US economic data, with the core PCE deflator, the Fed’s preferred inflation measure, being the main report. From Japan’s perspective, Bank of Japan officials are scattered across the country, along with retail sales and unemployment data.
USD/JPY Economic Calendar (GMT +02:00)
sauce: DailyFX Economic Calendar
Money market pricing (see table below) predicts rate hikes towards the second half of 2024, but as we have seen for many central banks this year, the power of future data remains It’s a big deal and can change your expectations significantly.
Bank of Japan interest rate probability
Source: Refinitiv
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Technical analysis of USD/JPY
USD/JPY daily chart
chart creator Warren BenketasI.G.
The daily USD/JPY price movement respects the recent 50-day moving average (yellow), and the Relative Strength Index (RSI) is gaining bearish momentum in the short term. That being said, the closing price of last week’s weekly candlestick formed a hammer-like candlestick that could signal a long-term bullish trend. The last few candlesticks of the daily scale currently resemble an ascending triangle-shaped pattern, which is also a bullish supporter.
Main resistance levels:
Main support levels:
- 148.16
- 50-day moving average (yellow)
- 147.37
- 145.91
- 145.00
IG client sentiment: pros and cons
IGCS shows retail traders are currently showing net profits short In USD/JPY, 81% Number of traders currently holding short positions (as of this writing).
Want to know how market positioning affects asset prices? Our sentiment guide has the insight. Download now.
Overview of technical analysis
market sentiment
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Daily FX We provide technical analysis on foreign exchange news and trends affecting global currency markets.