USD/JPY analysis and issues
- Yen offers continue into next week as Japan’s inflation eases.
- US inflation, GDP, and durable goods are in the spotlight this week.
- The bearish divergence collides with the ascending triangle pattern on the daily chart.
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Basic background of the Japanese yen
The Japanese yen is once again on the border with the important dollar 150 Following Bank of Japan (BOJ) Governor Ueda’s comments, Level made some cautious statements (see below), most notably regarding monetary policy. He reiterated Japan’s continued implementation of accommodative monetary policy to achieve the inflation target, after Japan’s inflation softened in all indicators, including both core and headline newspapers. This weighed negatively on the yen, with the US dollar barely selling.
“There is a high level of uncertainty surrounding the Japanese economy.”
“By patiently maintaining the current easing policy, the Bank of Japan aims to achieve the 2% inflation target in a stable and sustainable manner with wage increases,” he said.
“We need to carefully monitor trends in the financial and foreign exchange markets and their impact on Japan’s economy and prices,” he said.
That being said, energy prices are on the rise and could have an upward impact on inflation going forward. Money markets are currently predicting a rate hike around July/September 2024, and with wage increases noticeable, the Bank of Japan’s outlook is less dovish if these data points continue on their current trajectory. It may not be the target.
Bank of Japan interest rate probability
Source: Refinitiv
Looking at the 10-year government bond below, the yield is steadily approaching. 1% Set caps according to yield curve management guidelines. The Bank of Japan will likely keep a close eye on this indicator to avoid a rapid rise.
10 year Japanese government bond
Source: Refinitiv
As tensions between Israel and Hamas rise, the yen’s safe-haven appeal has been temporarily overshadowed by the dovish rhetoric mentioned above, but intervention at this level could be considered.
The coming week will focus primarily on U.S.-specific factors, but the Fed’s preferred inflation measure (PCE price index) will be the most important. Other important data includes durable goods orders, Michigan consumer sentiment, and GDP.
USD/JPY Economic Calendar (GMT +02:00)
sauce: DailyFX Economic Calendar
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Technical analysis of USD/JPY
USD/JPY daily chart
chart creator Warren BenketasI.G.
The daily USD/JPY price movement resembles the formation of an ascending triangle with resistance. 150.00 psychological handle. Traditionally a bullish signal, a bearish/negative divergence could signal a possible pullback to the downside, as the Relative Strength Index (RSI) is showing lower highs.
Main resistance levels:
Main support levels:
- 148.16
- 50-day moving average (yellow)
- 147.37
- 145.91
- 145.00
IG Client Sentiment: Bullish
IGCS shows retail traders are currently showing net profits short In USD/JPY, 86% Number of traders currently holding short positions (as of this writing).
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Overview of technical analysis
market sentiment
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