Technical Analysis

USD/JPY Price Analysis – July 03, 2024

By LonghornFX Technical Analysis
Jul 4, 20243 min

Daily Price Outlook

During the European trading session, the USD/JPY pair continued its bearish trend and edged lower around the 161.31 level, hitting an intraday low of 161.14. The downward movement can be attributed to the weakening US dollar, which lost traction due to lackluster economic data, raising expectations of Fed rate cuts in 2024, and putting pressure on the currency.

Moreover, the prospect of FX intervention by Japanese authorities adds uncertainty to the pair's outlook. Traders will closely monitor economic indicators, central bank communications, and geopolitical developments for insights into the future direction of USD/JPY.

Impact of Dovish Fed and Economic Data on USD/JPY Pair

On the US front, recently released downbeat economic data have raised expectations that the Federal Reserve (Fed) might consider cutting interest rates in 2024. US Treasury yields have declined in response to these lackluster data releases, signaling reduced confidence in the economic outlook.

Fed Chair Jerome Powell's recent comments about the central bank's cautious approach towards inflation and the need for more evidence before adjusting rates have fueled market speculation. This dovish stance by the Fed has weighed on the US Dollar, contributing to its losses in the USD/JPY pair.

Impact of Japanese Intervention Speculation on USD/JPY Pair

On the BOJ front, the recent weakening of the Japanese Yen has raised concerns among policymakers about its potential impact on the economy.

As the Yen depreciates against the US Dollar (USD), it could increase import costs, potentially leading to higher inflation and reduced purchasing power for Japanese consumers. To counteract these effects, there is speculation that Japanese authorities may intervene in the currency markets.

This intervention could involve selling Yen and buying Dollars to stabilize the exchange rate. By doing so, they hope to maintain stable import prices, support consumer confidence, and mitigate any adverse economic impacts caused by a weakening Yen.

Therefore, the speculation of Japanese intervention to stabilize the Yen could impact the USD/JPY pair by potentially halting or reversing the Yen's depreciation trend against the US Dollar.

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

USD/JPY - Technical Analysis

The USD/JPY pair is currently trading at $161.379, experiencing a slight decline of 0.11% in early trading. On the 4-hour chart, pivotal technical levels are clearly outlined. The pivot point is established at $161.1430, which could serve as a significant threshold for determining the market's direction today.

Immediate resistance levels are noted at $161.9460, $162.3800, and $162.8150. A break above these resistance points might signal further upward momentum, potentially leading to new highs.

Conversely, immediate support is identified at $160.7830, with further support levels at $160.2900 and $159.8800. These levels could offer buying opportunities if the price continues to fall.

The technical indicators present a mixed outlook. The Relative Strength Index (RSI) is currently at 53, suggesting a relatively neutral stance but leaning slightly towards the bearish side due to the recent price drop.

The 50-day Exponential Moving Average (EMA) is positioned at $160.7320, indicating a bullish trend as long as the price remains above this level. The EMA acts as dynamic support, and a sustained price above this level would reinforce a bullish outlook.

Given the current market scenario, a prudent trading strategy would be to enter a long position if the price moves above $161.154. Setting a take-profit target at $161.945 aligns with immediate resistance levels, ensuring a favorable risk-reward ratio while capturing potential upward movement.

A stop-loss at $160.785, just below immediate support, helps mitigate risk from unexpected downward shifts.

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