USD/JPY Price Analysis – July 18, 2024

Daily Price Outlook

During the European trading session, the USD/JPY currency pair maintained its upward trend and remained well-bid around 156.45, hitting the intra-day high of 156.59 level. This is mainly because the US Dollar is performing well compared to the Japanese Yen.

US Treasury bond yields have also slightly risen, making them more attractive to investors looking for higher returns despite uncertain global economic conditions. These factors together are boosting the USD/JPY pair, indicating more confidence in the US Dollar's strength against the Yen in the market.

Moreover, the US economy has demonstrated resilience across various economic indicators, including steady retail sales figures and optimistic sentiments from Federal Reserve officials regarding inflation trends.

Federal Reserve Chairman Jerome Powell's recent remarks have underscored confidence that inflation is progressing towards the Fed's target, further bolstering support for the US Dollar.

Expectations of Further Intervention by Japanese Authorities and Its Impact on USD/JPY Pair

Traders and analysts are closely monitoring the actions of Japanese authorities, who have hinted at potential interventions in the currency market to prevent excessive volatility in the Japanese Yen. Recent statements by Japan's top currency diplomat, Masato Kanda, underscore the authorities' readiness to intervene if speculators drive "excessive" movements in the Yen.

The anticipation of intervention has created a cautious atmosphere among traders dealing with the USD/JPY pair. The intervention actions, if implemented, could potentially limit the Yen's appreciation against the US Dollar, thereby supporting the pair's upward momentum.

Market participants are keenly observing any developments from Japanese policymakers, as these interventions could significantly influence short-term movements in the currency markets.

Fed's Inflation Optimism and Rate Cut Speculation and Its Impact on USD/JPY Pair

On the US front, the Federal Reserve's stance on monetary policy and inflation expectations play a crucial role in shaping the trend of the USD/JPY pair.

Recently, Fed officials, including Governor Christopher Waller and Richmond Fed President Thomas Barkin, have hinted at the possibility of an interest rate cut in the upcoming September meeting. This speculation has been fueled by easing inflationary pressures and a desire to sustain economic momentum amidst global uncertainties.

Market expectations for a rate cut have increased substantially, with the CME Group's FedWatch Tool indicating a high probability of a 25-basis point rate reduction. Such expectations tend to weigh on the US Dollar's strength, as lower interest rates make the currency less attractive to investors seeking higher yields.

Consequently, the USD/JPY pair may face downward pressure if the Fed moves forward with rate cuts, as it would diminish the Dollar's appeal relative to the Yen.

USD/JPY - Technical Analysis

The USD/JPY is trading at $156.079, up 0.09%, indicating slight upward movement in a cautiously optimistic market. The 4-hour chart highlights significant levels for traders to consider.

The pivot point is marked at $156.7620, a crucial level that could determine near-term price action. Immediate resistance is identified at $157.7310, with further resistance levels at $158.6180 and $159.4250. On the downside, immediate support lies at $155.3700, followed by $154.5630 and $153.6750.

The Relative Strength Index (RSI) is at 31, suggesting that the pair is approaching oversold territory.

This indicator implies potential for a rebound or at least a temporary stabilization. The 50-day Exponential Moving Average (EMA) stands at $159.2220, well above the current price, indicating a bearish trend as long as prices remain below this level.

For traders, a strategic approach would be to set a sell limit at the pivot point of $156.762. Aiming for a take profit level at $154.987 ensures capturing gains from anticipated downward movement. To manage risk, a stop loss at $157.650 is recommended.

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