USD/JPY Price Analysis – July 25, 2024

Daily Price Outlook

During the European trading session, the USD/JPY currency pair continued its bearish trend, trading under pressure at the 152.58 level as the Japanese Yen (JPY) rose to its highest level in 12 weeks against the US Dollar (USD).

This drop is mainly due to traders closing their carry trades before the Bank of Japan’s (BoJ) upcoming policy meeting.

However, the carry trades involve borrowing in low-interest currencies like the Yen and investing in higher-interest assets. With the BoJ likely to change its policy soon, traders are exiting these trades, which strengthens the Yen and weakens the USD/JPY pair.

In simple words, traders are adjusting their strategies ahead of expected changes from the BoJ, impacting the Yen and Dollar.

Japanese Yen Hits 12-Week High as Traders Anticipate BoJ Policy Shift

On Thursday, the Japanese Yen rose to a 12-week high of 151.93 against the US Dollar. This increase happened because traders are closing their carry trades before the Bank of Japan’s (BoJ) policy meeting next week. The BoJ is expected to raise interest rates and cut back on buying bonds, which would reduce economic support.

As a result, traders are selling off positions that benefit from low rates, boosting the Yen. This caused the USD/JPY pair to fall, showing that the Yen is gaining strength due to expectations of changes in Japan's monetary policy.

US Economic Data Increases Pressure on USD/JPY Amid Fed Policy Uncertainty

On the US front, the recent economic data is putting more pressure on the USD/JPY pair. The July Purchasing Managers' Index (PMI) shows strong growth in private-sector activity, which might allow the Federal Reserve (Fed) to keep its tight monetary policy. Despite this, the US Dollar is still struggling.

Investors are waiting for upcoming reports on US GDP and inflation to see if the Fed will change its policies. If these reports show slower inflation or economic growth, the Dollar could weaken even more, which would add to the downward trend in the USD/JPY pair.

USD/JPY - Technical Analysis

The USD/JPY pair declined by 0.97%, currently trading at $152.802, reflecting a bearish sentiment in the market. This drop brings the currency pair closer to significant technical levels, prompting traders to reassess their positions and strategies.

The pivot point at $154.011 is crucial for determining the next move. Immediate resistance is observed at $153.436, and breaking above this could drive the pair towards the next resistance levels of $154.551 and $155.596.

Conversely, immediate support is found at $151.695, with further support levels at $151.052 and $150.314, which are essential for maintaining the upward trend.

Technical indicators show mixed signals. The Relative Strength Index (RSI) is at 24, indicating that the USD/JPY is entering oversold territory. This suggests a potential for a reversal or a consolidation phase as the market adjusts to the oversold conditions.

The 50-day Exponential Moving Average (EMA) is at $156.607, highlighting a bearish trend as the current price is significantly below this level. A sustained move below the 50 EMA typically signals continued downward momentum, putting pressure on the USD/JPY.

In conclusion, traders should consider long positions above $152.250, targeting $154.000 for profit-taking, with a stop loss set at $151.000.

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