Technical Analysis

USD/JPY Price Analysis – June 6, 2024

By LonghornFX Technical Analysis
Jun 6, 20243 min

Daily Price Outlook

During the European trading session, the USD/JPY currency pair showed bullish performance and remained well bid around 156.19, hitting the intra-day high of 156.38 level.

The reason for its upward trend can be attributed to the US dollar, which is gaining strength against the Japanese yen as investors turn towards the US dollar in anticipation of the release of key US economic data, particularly the Nonfarm Payrolls (NFP) report scheduled for Friday.

The NFP report is closely watched by market participants as it provides insights into the health of the US labor market, influencing the Federal Reserve's monetary policy decisions.

Moreover, there is speculation that the Federal Reserve may implement rate cuts in the future. This speculation has put pressure on the US dollar, but anticipation of the NFP report has still driven investors towards the currency, resulting in a bullish performance of the USD/JPY pair.

Impact of Investor Sentiment and Economic Data on USD/JPY

On the US front, investors' turn towards the US dollar ahead of the NFP report, which has had a significant impact on the USD/JPY pair. Meanwhile, the mixed economic data from the US has fueled speculation of rate cuts by the Federal Reserve, anticipation of the NFP report has overshadowed these concerns, leading to increased demand for the US dollar.

However, uncertainty surrounding future monetary policy decisions by the Federal Reserve could limit the upside of the US dollar and the USD/JPY pair. If the NFP report fails to meet expectations or indicates weakening economic conditions in the US, it could further dampen investor sentiment towards the US dollar, thereby affecting the performance of the USD/JPY pair.

Impact of Japan’s Bond Yields on USD/JPY

On the other side, Japan's 10-year bond yield falling below 1% for the first time in two weeks has also influenced the USD/JPY pair.

However, the lower bond yields in Japan indicate reduced attractiveness of Japanese assets, prompting investors to seek higher-yielding assets such as the US dollar. Consequently, this has contributed to the bullish performance of the USD/JPY pair as investors favor the US dollar over the Japanese yen.

However, ongoing challenges in Japan's economy, including weak inflation and stagnant wage growth, continue to weigh on the Japanese yen and support the upward trend of the USD/JPY pair.

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

USD/JPY - Technical Analysis

USD/JPY is currently trading at $156.29, reflecting a marginal increase of 0.01% on a four-hour chart timeframe. The pivot point is positioned at $157.25, a crucial level for determining the market's direction.

Immediate resistance is observed at $156.59, followed by $157.72 and $158.62. On the downside, immediate support is found at $154.55, with subsequent levels at $153.65 and $152.77.

The Relative Strength Index (RSI) is at 52, indicating a balanced momentum without overbought or oversold conditions. The 50-day Exponential Moving Average (EMA) is at $156.59, aligning closely with the current price and suggesting consolidation around this level.

In conclusion, USD/JPY presents a cautious bullish outlook above $155.350. Traders are recommended to consider buying above this level, with a target of $157.250. A stop loss should be set at $154.500 to mitigate potential downside risks.

The current technical indicators and key price levels suggest that while the market shows a slight upward bias, significant movements depend on breaking through key resistance levels at $156.59 and $157.72.

Conversely, a drop below immediate support at $154.55 could shift the trend towards a bearish outlook, warranting close observation of subsequent support levels.

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