Technical Analysis

USD/JPY Price Analysis – April 04, 2023

By LonghornFX Technical Analysis
Apr 4, 20233 min

Daily Price Outlook

The USD/JPY is trading at 133.16, showing an increase of 0.36% in the last 24 hours. The release of Japan's economic data related to the labor market, retail demand, and Tokyo CPI has led to a significant upward movement for the currency pair.

Furthermore, as fears about additional bank failures wane, the Japanese Yen, which is considered a global safe-haven asset, is declining against the US dollar.

US GDP Plunges, Pushing USD/JPY Lower

The final estimate of the US GDP for the fourth quarter of 2022 has decreased slightly from 2.7% to 2.6%, down from the Q3 print of 3.2%. Additionally, US data released on Thursday revealed that unemployment claims from the previous week increased to 198K, higher than expected, indicating a softening labor market. These data points support the argument for a more relaxed Federal Reserve stance.

As markets continue to downplay the likelihood of further rate hikes, the US Dollar Basket (DXY), a gauge of USD performance, dropped to 102.17 after the release of the GDP report.

On Friday, the core PCE price index, which the Fed prefers to use as a measure of inflation, will be released. The index will provide further details on the state of the world's leading economy and may offer additional support for the USD/JPY pair.

Tokyo Inflation Slowdown, Weakening JPY

In March, Tokyo's inflation rate continued to decrease, following a significant decline in February caused by government subsidies for electricity costs. According to statistics from the Statistical Bureau, Tokyo's Core CPI increased by 3.2% in the 12 months ending in March, slightly above forecasts for growth of 3.1% but falling short of the previous month's figure of 3.3%.

Overall, Tokyo's CPI rose by 3.3% in March, slightly down from the 3.4% increase recorded in February. Steady inflation indicates that the Bank of Japan's (BoJ) goal to maintain inflation consistently at desired targets remains unaffected. This may increase the likelihood of ending the ultra-loose monetary policy.

However, retail demand in Japan remained strong in February. Yearly Retail Sales data has increased significantly from an estimated 5.8% to 6.6%. The BoJ's policymakers and the Japanese government are concerned that factors outside of domestic demand are primarily responsible for inflationary pressures in Japan. Nevertheless, current retail demand may alleviate some concerns.

Furthermore, the dismal labor market statistics are driving the recent decline of the Japanese Yen. Compared to the consensus and the previous announcement of 2.4%, the unemployment rate has risen to 2.6%. The USD/JPY as a safe haven has risen as Japan's increasing unemployment rate requires the continuation of the BoJ's loose policy.

 USD/JPY Price Chart - Source: Tradingview

USD/JPY Intraday Technical Levels

Support      Resistance

132.52         133.57

131.84         133.94

131.46         134.62

Pivot Point: 132.89

USD/JPY  – Technical Outlook

The USDJPY pair experienced a noticeable decline after testing the 133.30 level in previous sessions, resuming the anticipated bearish trend on both intraday and short-term basis. The next primary targets are the 131.60 and 130.40 levels.

To reinforce the expectations of continuing the bearish trend and moving towards the suggested targets, the price needs to break through the strong support base formed by the EMA50, which currently stands at 132.50.

The projected trading range for today is between 131.60 support and 133.30 resistance.


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