USD/JPY Price Analysis – Aug 08, 2024
Daily Price Outlook
During Thursday's European session, the USD/JPY currency pair continued its bearish trend, remaining under pressure near the 146.25 level and reaching an intra-day low of 145.43. This decline is primarily due to the strengthening of the Japanese Yen (JPY), which gained traction after the release of the Bank of Japan’s (BoJ) Summary of Opinions (SoP) from the July 30-31 meeting.
The SoP indicated that officials acknowledged the need for more rate hikes to address inflationary pressures driven by higher import prices. This acknowledgment bolstered the Yen, contributing to the downward movement of the USD/JPY pair. On the other side, the US dollar losing traction was another key factor keeping the USD/JPY pair lower.
Impact of Fed Rate Cut Expectations on USD and Its Effect on USD/JPY Pair
On the US front, the broad-based US Dollar (USD) has also been under pressure, exacerbating the bearish trend of the USD/JPY pair. However, the anticipation of significant rate cuts by the Federal Reserve (Fed) has been weighing on the USD. Investors are expecting that the Fed will soon implement substantial rate reductions to support economic growth, which diminishes the appeal of holding USD. This expectation contributes to the USD’s decline against the Yen.
Impact of BoJ’s Summary of Opinions on Japanese Yen Strength and Market Stability
On the flip side, the Japanese Yen's recent strengthening is directly linked to the BoJ’s latest Summary of Opinions. The BoJ's acknowledgment of the need for further rate hikes to curb inflation has bolstered investor confidence in the Yen. The prospect of higher interest rates in Japan supports the Yen by increasing its yield compared to the USD.
However, the BoJ’s stance also highlights potential market instability. BoJ Deputy Governor Shinichi Uchida’s statement that rate hikes would not be pursued during market instability underscores the cautious approach of the central bank.
Therefore, the Japanese Yen's strengthening, driven by anticipated BoJ rate hikes, and concerns about market instability have intensified the USD/JPY pair's bearish trend, leading to further declines in the USD.
USD/JPY - Technical Analysis
The USD/JPY pair is currently trading at $145.99, marking a 0.44% decline. The 4-hour chart indicates a pivotal point at $146.93.
Immediate resistance levels are identified at $148.54, $150.10, and $152.34, which could act as barriers to any upward movement.
On the downside, immediate support is found at $144.96, with further support at $143.69 and $141.79, offering potential stabilization points if the price continues to fall.
The Relative Strength Index (RSI) is at 45, suggesting that the pair is neither overbought nor oversold, but closer to the lower end of the spectrum.
The 50-day Exponential Moving Average (EMA) stands at $148.89, indicating bearish momentum as the price is below this level.
A move above the pivot point of $146.93 could signal a reversal, while staying below this level may reinforce the bearish outlook.
In light of the current technical indicators and key price levels, the recommended strategy is to enter a sell limit order at $146.932, with a take profit target at $144.024 and a stop loss at $148.498.
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