USD/JPY Price Analysis – Aug 15, 2024
Daily Price Outlook
During the European trading session, the USD/JPY currency pair experienced a bearish trend and edged lower around 147.28 level as the Japanese Yen (JPY) gaining strength against the US Dollar (USD).
This downward movement in the USD/JPY pair was driven by Japan's stronger-than-expected Gross Domestic Product (GDP) data for Q2, raising expectations for a potential hawkish stance from the Bank of Japan (BoJ).
While the Japanese Yen strengthens on the back of positive GDP figures, the US Dollar faces pressure from potential Fed rate cuts and mixed economic signals.
This combination of factors is driving the USD/JPY pair lower, with ongoing market adjustments to central bank expectations likely to influence future movements.
Japan's Robust GDP Growth and BoJ Policy Expectations Bolster JPY
On the JPY front, Japan's GDP growth for Q2 surged by 0.8%, surpassing market forecasts of 0.5% and marking the strongest quarterly growth since early 2023.
The annualized GDP growth also reached 3.1%, exceeding the expected 2.1%. This robust economic performance is bolstering expectations that the BoJ might shift towards a more hawkish policy.
This underpinned the JPY currency and contributed to the USD/JPY pair. Japanese Economy Minister Yoshitaka Shindo's remarks about a gradual economic recovery driven by improving wages and income, along with the BoJ's goal of a neutral rate "at least around 1%" as a medium-term target, support the Yen's strength.
Impact of Fed Rate Cut Expectations and US CPI Data on USD/JPY Decline
On the US front, the pair decline is also influenced by the Federal Reserve’s potential policy decisions.
Despite recent improvements in Treasury yields, the anticipation of a potential 25 basis point rate cut by the Fed in September is pressuring the US Dollar, which was seen as another key factor that put pressure on USD/JPY pair.
On the data front, US CPI data for July showed a moderate 2.9% annual increase, leading to speculation about the extent of future Fed rate cuts.
Traders are leaning towards a smaller 25 basis point reduction, with a 36% chance of a larger 50 basis point cut, as indicated by CME FedWatch.
This dovish sentiment from the Fed, coupled with concerns about labor market conditions, is adding to the downward pressure on the USD.
USD/JPY - Technical Analysis
USD/JPY is currently trading at $147.211, showing a slight decline as it moves closer to the pivot point at $147.864.
The pair has been in a tight range, reflecting a cautious market sentiment. The 4-hour chart reveals that the 50-day Exponential Moving Average (EMA) at $146.386 is providing solid support, suggesting that the pair might find some stability at these levels before making its next move.
Immediate resistance is seen at $149.365, with further resistance at $150.900 and $152.597. If USD/JPY breaks above these levels, we could see a continuation of the uptrend.
However, the downside risks are also significant. Immediate support is at $145.514, followed by $143.462 and $141.787. A break below these supports could accelerate the downward momentum.
The Relative Strength Index (RSI) is hovering near neutral levels, indicating that the market is neither overbought nor oversold, leaving room for potential volatility.
Given the current setup, traders should be cautious about both upside and downside risks.
For those looking to trade, a sell limit order around $147.850 could be effective, with a take-profit target at $145. Setting a stop-loss at $149.350 would help manage potential losses if the market unexpectedly turns bullish.
Overall, while the technical indicators suggest some downside risk, it’s essential to watch the key levels closely.
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