USD/JPY Price Analysis – July 17, 2023

Daily Price Outlook

USD/JPY has witnessed a decline from 145.06 to a low of 138.75 so far today, with the next target being the support turned resistance at 137.90. The pair remains vulnerable to testing the 50% Fibonacci retracement support near 137.40.

Meanwhile, GBP/JPY has rebounded from around 181.00 as anticipation builds for consecutive interest rate hikes by the Bank of England (BoE). The market expects the BoE to announce a second substantial rate hike at its upcoming monetary policy meeting in August, which has generated buying interest in the currency pair.

Previously, investors were expecting a modest 25 basis points increase when BoE Governor Andrew Bailey surprised the market with a 50 basis points hike to 5% in June. The sudden rise in the Consumer Price Index (CPI) headline and the record high core inflation of 7.1% prompted the central bank to implement a significant rate hike.

Looking ahead, investors are eagerly awaiting the Bank of Japan's (BoJ) interest rate decision, scheduled for next week. Seisaku Kameda, a former senior economist at the BoJ, suggested that the central bank is unlikely to change its interest rate policy and will likely maintain its economic projections for 2024 and 2025.

USD/JPY - Technical analysis

The USD/JPY pair experienced a strong support level at 137.35, leading to a noticeable upward rebound and a subsequent test of the key resistance level at 139.17.

However, it is worth mentioning that the price failed to break above this level and has started to show signs of consolidation.

This indicates a potential resumption of the correctional bearish trend in the upcoming sessions, with a target of revisiting the support at 137.35. Breaking below this level would further push the price towards the next correctional target at 135.55.

The current negative overlap of the stochastic indicator reinforces the likelihood of a resumption of negative trades today, supporting the overall bearish bias unless there is a breach of the resistance level at 139.17 and a sustained hold above it.