USD/JPY Price Analysis – Dec 12, 2024
Daily Price Outlook
During the European trading session, the USD/JPY currency pair struggled to gain any significant momentum, staying sluggish around the 152.44 mark and dipping to an intraday low of 151.95.
This decline comes despite an overall positive sentiment in equity markets and reports suggesting that the Bank of Japan (BoJ) is likely to keep rates steady in its upcoming meeting.
The downward trend is linked to a modest weakness in the US dollar, which lost its earlier traction even after strong US economic data.
Although, the latest US inflation report wasn’t enough to convince markets that the Federal Reserve will avoid cutting interest rates at its upcoming December meeting.
Traders are now almost certain of a 25-basis-point rate cut on December 18, with the CME FedWatch Tool showing a 99% probability.
Market participants are shifting their attention to the US November Producer Price Index (PPI), expected later on Thursday, for fresh insights.
BoJ Policy Uncertainty and US Dollar Strength Weigh on USD/JPY
On the BoJ front, investors remain doubtful about the Bank of Japan’s willingness to tighten its monetary policy further, which is weighing on the Japanese Yen (JPY).
Reports from Reuters suggest that the BoJ is likely to keep interest rates steady at its upcoming policy meeting, though it remains open to a hike depending on economic data and market conditions.
Mixed signals from BoJ officials show no rush to tighten policy, keeping traders cautious about placing big bets on the Yen.
Japan's economy is growing moderately, with rising wages and inflation staying above the BoJ’s 2% target, suggesting conditions may support future hikes.
However, with the Federal Reserve’s decision on a likely rate cut just hours before the BoJ meeting, traders are hesitant to take strong positions.
On the other side, the US dollar is finding some support from higher US Treasury yields, boosted by expectations that the Fed will take a cautious approach to further rate cuts.
The recent US Consumer Price Index (CPI) data showed inflation picking up slightly, with the core CPI rising 3.3% year-over-year in November.
However, progress toward the Fed’s 2% inflation target seems to have stalled, raising uncertainty about future rate decisions.
The US Producer Price Index (PPI) and Weekly Initial Jobless Claims, due later on Thursday, are expected to provide fresh market direction.
These factors, combined with a positive tone in equity markets, are keeping the USD/JPY pair steady despite the JPY's recent weakness.
USD/JPY – Technical Analysis
The USD/JPY pair is trading at 152.523, up 0.04%, reflecting modest upward momentum on the 4-hour chart. The pair is finding support near the pivot point at 151.960, a critical level that traders are monitoring for potential direction.
Immediate resistance is located at 152.749, followed by key levels at 153.605 and 154.558, suggesting room for bullish continuation if the pair can maintain momentum.
On the downside, immediate support lies at 150.994, with deeper levels at 149.836 and 148.883 providing a safety net in case of a pullback.
The 50-day Exponential Moving Average (EMA) at 151.279 underpins short-term bullish sentiment, reinforcing the ongoing upward trend.
The Relative Strength Index (RSI) at 59 indicates neutral-to-bullish momentum, suggesting the pair has room to rise before entering overbought territory.
Traders may consider a buy limit entry at 152.125, targeting 153.600 with a stop loss at 151.500 to manage downside risk.
The technical setup suggests a cautiously bullish outlook for USD/JPY, supported by a broader risk-on sentiment in the markets.
A decisive move above the 152.749 resistance could pave the way for further gains, while holding above the pivot will be crucial to maintaining positive momentum.
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