USD/JPY Price Analysis – July 26, 2023

Daily Price Outlook

The USD/JPY pair is witnessing renewed selling pressure, declining for the third consecutive session. During early European session, the pair is trading around 140.66 with -0.18% loss in 24 hours, just above the weekly low.

The US Dollar continues to retreat for the second day, contributing to the downward pressure on the USD/JPY pair. Conversely, the Japanese Yen experiences a slight boost from a positive business sentiment outlook in July, as indicated in Japan's monthly report. Additionally, Japan maintains its assessment of a moderate economic recovery.

On the international front, the International Monetary Fund (IMF) warns of higher inflation in Japan and urges the Bank of Japan (BoJ) to exit its easy-money policy. However, BoJ Governor Kazuo Ueda reaffirms the bank's commitment to an accommodative monetary stance and stable long-term yield rates under the yield curve control (YCC) policy. The risk-on sentiment further supports the USD/JPY pair by capping the safe-haven appeal of the JPY.

Traders are cautious and await the outcome of the important FOMC policy meeting, where a 25 bps interest rate hike is expected. However, there is skepticism regarding whether the US central bank will adopt a more dovish stance despite the robust economy. 

Market focus remains on the policy statement and Fed Chair Jerome Powell's press conference for clues about the future rate-hike path, which will impact on the USD price movement and offer fresh direction to the USD/JPY pair.

Following this event, investors' attention will shift to the two-day BoJ monetary policy meeting starting on Thursday. However, given the fundamental backdrop, caution is warranted before confirming the sustainability of the recent rebound from the nearly two-month low.

USD/JPY - Technical analysis

The USD/JPY pair is currently trading below the 141.40 level and is expected to face downward pressure in the upcoming sessions, targeting potential support levels at 140.40 and 139.17.

As a result, a bearish bias is suggested for today, contingent upon the price remaining stable below 141.40.

However, if the pair manages to breach this level, it could indicate a positive factor that may lead to a resumption of the main bullish trend and potentially achieve further gains up to 142.90.

The anticipated trading range for today is projected to be between the support level at 140.30 and the resistance level at 141.80.