USD/JPY Price Analysis – Feb 29, 2024

Daily Price Outlook

Despite the bullish US dollar, the USD/JPY currency pair failed to stop its downward performance and remained bearish around the 149.69 level. However, the declines in the pair were exacerbated by the hawkish comments from Bank of Japan (BoJ) board member Hajime Takata, which bolstered the Japanese Yen (JPY) and contributed to the USD/JPY pair's decline. Furthermore, the risk-off market sentiment provided additional support to the safe-haven JPY. On the contrary, the bullish US dollar, supported by upbeat economic data and a hawkish Fed outlook, was seen as a key factor that may help limit the losses of the USD/JPY pair.

Moving ahead, traders seem cautious to place any strong positions ahead of the release of the US Personal Consumption Expenditures (PCE) Price Index. This US inflation data will influence the Federal Reserve's (Fed) future policy decisions, which, in turn, will provide a fresh directional impetus to the USD/JPY pair.

BOJ Policy Outlook and Economic Indicators in Japan

On the BOJ front, a member named Hajime Takata suggested that Japan's central bank should think about gradually stepping away from its super loose monetary policy since they're close to reaching their inflation goal. This means they might start to adjust things as needed. This indicates a more aggressive stance toward potential policy adjustments in response to economic conditions. Furthermore, Japan's finance minister, Masato Kanda, issued a warning about monitoring currency movements closely and being prepared to intervene if volatility escalates.

Therefore, these statements signal a readiness to tighten monetary policy if necessary, which is typically seen as hawkish. This underpinned the Japanese Yen (JPY) and pushed the USD/JPY pair lower.

On the data front, recent reports show that Japanese retail sales rose by 2.3% over the past year until January, which is better than expected. However, industrial production dropped by 7.5% in January alone. This means people are spending more at stores, but factories are making fewer goods, which could affect the economy. The rise in retail sales could strengthen the Japanese Yen (JPY) against the US Dollar (USD) as it suggests increased domestic spending. Conversely, the decline in industrial production may weaken the JPY, as it indicates a potential economic slowdown, impacting the USD/JPY pair.

US Economic Growth and Monetary Policy Developments

On the US front, recent data suggests the economy is performing well. This, coupled with positive comments from Federal Reserve officials, supports the US Dollar. New York Fed President John Williams hinted at potential interest rate hikes this year, depending on how things go, but reaching the 2% inflation goal might take a while. Atlanta Fed President Raphael Bostic emphasized caution about inflation and advised patience with monetary policy changes. Boston Fed Bank President Susan Collins also hinted at possible policy adjustments later in the year but acknowledged challenges in hitting the inflation target. This boosts the US Dollar and could help the USD/JPY pair ahead of important inflation data.

On the US data front, the latest update on the country's economic growth came out on Wednesday. It showed that the US economy grew by 3.2% in the last quarter of the year. This is slightly lower than the earlier estimate of 3.3% growth, but it still indicates a strong performance.

USD/JPY - Technical Analysis

On February 29, the USD/JPY experienced a notable decline, dropping by 0.65% to settle at 149.82. This movement underscores a significant shift in investor sentiment towards the pair, possibly influenced by broader market dynamics or shifts in monetary policy expectations.

The pivot point for the day is marked at 150.11, indicating the level from which the USD/JPY began its descent. Resistance levels are identified at 150.83, 151.22, and 151.62, which could potentially cap any upward correction attempts by the pair. On the downside, immediate support is found at 149.70, with further cushions at 149.27 and 148.95, serving as critical junctures that may arrest the pair's decline and offer opportunities for rebound.

Technical indicators reveal a deeper story. The Relative Strength Index (RSI) stands at 33, venturing into the oversold territory, suggesting that the pair might be under significant selling pressure but also indicating a possible ground for reversal if market conditions permit. The 50-day Exponential Moving Average (EMA) at 150.31, now above the current price, further highlights the bearish momentum but also marks a potential resistance level for any near-term recoveries.