Technical Analysis

USD/JPY Price Analysis – Feb 15, 2024

By LonghornFX Technical Analysis
Feb 15, 20243 min

Daily Price Outlook

The USD/JPY currency pair extended its downward trend and remained well offered around below 150.00 level. However, the bearish bias can be attributed to the stronger Japanese Yen, which is gaining momentum even though investors were hoping the Bank of Japan (BoJ) wouldn't stop its plan to boost the economy anytime soon.

Furthermore, the US dollar's bearish bias, driven by the risk-on market sentiment and subdued US Treasury yields, was seen as another key factor that kept the USD/JPY pair lower.

Impact of Market Sentiment and Fed Expectations on USD/JPY Pair

The broad-based US dollar, measured by the US Dollar Index, has lost its momentum and dropped to 104.60 after hitting a three-month high of 105.00. However, this decline can be tied to risk-on market sentiment, with S&P500 futures showing decent gains, suggesting renewed investor confidence in the market, which tends to undermine safe-haven assets like the US dollar.

However, the overall market outlook remains uncertain as investors scale back expectations of Federal Reserve (Fed) rate cuts in May, with the focus shifting to potential cuts in June.

Looking ahead, investors are awaiting the US Retail Sales data release, which is expected to show a slight contraction according to consensus estimates. Therefore, the news may lead to a weaker USD/JPY pair as the dollar retreats and investors reassess Fed rate cut expectations.

Impact of Japanese Economic Recession on USD/JPY Pair

Another factor that has been affecting the USD/JPY pair is the strengthening of the Japanese Yen, despite investors' hopes that the Bank of Japan (BoJ) would continue its supportive policies. These hopes have faded due to Japan's unexpected entry into a technical recession, with Q4 GDP shrinking by 0.1% instead of the expected 0.3% growth.

This economic downturn has reduced expectations of the BoJ unwinding its stimulus measures anytime soon, contributing to the Yen's strength against the US Dollar. As a result, the USD/JPY pair will likely face downward pressure amid the uncertain economic conditions in Japan.

USD/JPY Price Chart - Source: Tradingview
USD/JPY Price Chart - Source: Tradingview

USD/JPY - Technical Analysis

The USD/JPY currency pair has experienced a modest retreat, with the current price standing at 150.221, marking a decrease of 0.25% over the past 24 hours. This movement indicates a slight cooling off from recent trading activity, as traders reassess their positions in the context of broader market dynamics and geopolitical influences.

The technical landscape reveals a pivot point at 148.83, which provides a baseline for the currency pair's short-term trajectory. Resistance levels are established at 150.05, 150.77, and 152.02, outlining potential hurdles for bullish momentum. On the flip side, support levels at 148.10, 146.88, and 146.16 delineate areas where buying interest might solidify, preventing further declines.

The Relative Strength Index (RSI) stands at 58, hovering close to the threshold of overbought territory but still within a range that suggests moderate buying pressure. The Moving Average Convergence Divergence (MACD) presents a more nuanced picture with a value of -0.045 and a signal line at 0.408.

The current positioning of the MACD indicates a slight bearish momentum, potentially hinting at a cautious approach among traders. The 50-day Exponential Moving Average (EMA) at 150.35 marginally surpasses the current price, suggesting a critical juncture for the currency pair’s short-term direction.

Given the current technical setup, the USD/JPY pair presents a cautiously optimistic scenario for bullish traders. The advised trading strategy involves setting a buy limit at 150, with a take profit target at 151.250, and a stop loss at 149.355. 

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