USD/JPY Price Analysis – May 17, 2023

Daily Price Outlook

In the early European session on Wednesday, the USD/JPY pair continued its upward trajectory for the fifth consecutive day, reaching a nearly two-week high.

However, market participants are cautious about placing new bets until spot prices surpass a key technical support level at the 200-day simple moving average (SMA), currently hovering around the significant round figure of 137.00.

The US Dollar (USD) has strengthened to almost a two-month high following recent hawkish comments from various Federal Reserve (Fed) officials. This has been a significant catalyst supporting the USD/JPY pair.

Cleveland Fed President Loretta Mester's statement on Tuesday that interest rates are not yet restrictive and the central bank is not ready to hold rates has reinforced the belief that the US central bank will maintain higher interest rates for an extended period, lending support to the greenback.

Conversely, the Japanese Yen (JPY) has been weighed down by the Bank of Japan's (BoJ) more dovish stance. Last week, BoJ Governor Kazuo Ueda mentioned that it was premature to discuss specific plans for scaling back the massive stimulus program.

This, coupled with a slight increase in US equity futures, has undermined the safe-haven status of the JPY and has sustained the positive trend of the USD/JPY pair. However, a slight decline in US Treasury bond yields might curb the bullish sentiment and deter traders from taking aggressive positions.

Nevertheless, given the prevailing market conditions, the path of least resistance for the USD/JPY pair is upward. Traders are now closely monitoring the US housing industry data, particularly building permits and housing starts, to gauge potential market momentum.

USD/JPY – Technical Outlook

On Wednesday, the USD/JPY currency pair was trading around the 109.750 level. From a technical perspective, there is evidence of a double top pattern forming in the two-hour timeframe, posing a significant obstacle around the 109.700 level. If buyers can successfully push the price above this level, there is a strong possibility of a bullish continuation.

Furthermore, there is an ascending trendline providing crucial support to USD/JPY. This suggests that the bullish sentiment is likely to dominate the market. Additionally, the 50-day exponential moving average and other leading indicators, such as RSI and MACD, are holding steady, supporting the bullish outlook.

Given the current situation, today's strategy is to look for buying opportunities around the 109.700 level with a target resistance of 110.750. However, if the USD/JPY pair breaks below the support level 109.300, it could decline toward the next key support at 108.700.

Keeping a close eye on the 109.700 level is crucial, as a break above it may attract buyers in the USD/JPY currency pair.