Technical Analysis

USD/JPY Price Analysis – June 20, 2024

By LonghornFX Technical Analysis
Jun 20, 20243 min

Daily Price Outlook

During the European trading session, the USD/JPY currency pair has showed a bullish trend and remained well bid around the 158.44 mark, hitting the intra-day high of 158.51 level. However, the bullish sentiment is primarily driven by several factors including the Bank of Japan's conservative stance, evident in its decision to delay tapering Japanese Government Bond purchases. This move suggests prolonged accommodative monetary policy, reducing confidence in the Yen and bolstering the Dollar's position against it in currency markets.

Furthermore, the global equity markets' upbeat mood has contributed to diminishing demand for safe-haven assets like the Japanese Yen. As investors seek higher returns in riskier assets, the allure of the Yen as a safe-haven diminishes, further supporting the bullish case for the USD/JPY pair.

BoJ’s Cautious Approach and the Upbeat Market Mood Undermine the Safe-Haven JPY and Its Impact on USD/JPY Pair

On the BOJ front, the Bank of Japan's cautious strategy regarding tapering asset purchases has significant implications for the USD/JPY pair. By postponing discussions on reducing stimulus, the BoJ indicates a commitment to keeping monetary policy accommodative, which typically weakens the Japanese Yen. This diminishes the Yen's status as a safe-haven currency, prompting investors to favor higher-yield assets and riskier investments instead.

Moreover, the upbeat mood in global equity markets further undermines the demand for the safe-haven JPY. Investors, seeking higher returns, move away from safe assets like the Yen towards currencies linked to economic growth, such as the US Dollar. This shift supports the USD/JPY pair's upward trend, indicating a preference for riskier investments over safe havens.

Fed Rate-Cut Uncertainty Keeps the USD Bulls on the Defensive and Caps Gains for the Major and Its Impact on USD/JPY Pair

Despite the USD/JPY pair's bullish momentum, uncertainties surrounding Federal Reserve policy decisions regarding interest rates have tempered the US Dollar's strength. The market sentiment anticipates potential rate cuts by the Fed amidst signs of subsiding inflation and economic uncertainties. This cautious stance by the Fed keeps USD bulls on the defensive, limiting the extent of gains for the USD/JPY pair.

Investors closely monitor Federal Reserve communications and economic indicators for clues about future monetary policy actions. Speculations of multiple rate cuts this year suggest a less aggressive outlook for the US Dollar, contrasting with the more accommodative stance of other central banks, including the BoJ.

This divergence in monetary policy expectations influences investor sentiment and contributes to volatility in the USD/JPY pair, as market participants adjust their positions based on evolving economic data and central bank rhetoric.

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

USD/JPY - Technical Analysis

The USD/JPY pair is currently trading at $158.110, reflecting a modest increase of 0.04%. The 4-hour chart outlines key technical levels that are crucial for traders to watch. The pivot point at $158.1940 is a significant marker for determining the next direction of price movement. Immediate resistance is noted at $158.5240, with further resistance levels at $158.8310 and $159.1500. These resistance points could pose challenges for the pair’s upward trajectory.

On the support side, immediate support is situated at $157.6190, followed by more substantial support levels at $157.1500 and $156.7300. These support levels are critical for preventing further declines in the USD/JPY pair.

Technical Indicators:

    The overall technical outlook suggests a bullish sentiment above the pivot point of $158.1940.

    For traders looking to capitalize on the current trend, an entry price above $158.245 is recommended. The take profit level is set at $158.800, with a stop loss at $157.800 to manage potential risks.

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