Technical Analysis

USD/JPY Price Analysis – March 14, 2024

By LonghornFX Technical Analysis
Mar 14, 20243 min

Daily Price Outlook

The USD/JPY currency pair has been on an upward trend, finding support around the 147.85 level. The reason for its upward trend can be attributed to speculation surrounding the Bank of Japan's (BoJ) monetary policy stance. BoJ Governor Ueda's concerns over subdued consumption and the potential delay in rate hikes have strengthened demand for USD/JPY as investors favor higher-yielding assets.

Furthermore, diminishing expectations for a June rate cut by the Federal Reserve, amidst persistent inflation concerns, have boosted the US dollar against the Japanese yen. This shift supports the USD/JPY pair's upward trajectory, influenced by the evolving Fed policy outlook. The resilience of US Treasury yields, coupled with expectations of prolonged higher interest rates by the Fed, bolsters the bullish sentiment for the USD/JPY pair.

Market participants will focus on upcoming US Retail Sales data for February, as positive figures would indicate strong consumer spending, supporting expectations for unchanged Fed interest rates. This scenario could maintain the USD/JPY pair's upward momentum.

Concerns Over Spending and Deflation Impact BOJ Policy

On the BOJ front, Governor Ueda is worried that people aren't spending enough money, which is holding back economic growth. Even though the economy is improving slightly, the lack of spending remains a significant issue. Because of this, people speculate that the Bank of Japan might wait longer before raising interest rates. The Finance Minister also mentioned that Japan isn't ready to declare victory over deflation yet.

Therefore, the uncertainty surrounding the Bank of Japan's actions is leading to fluctuations in the USD/JPY pair. Markets remain uncertain about when the Bank will decide to raise interest rates, given subdued consumption and ongoing deflation concerns.

Focus on US Economic Data and Federal Reserve Policy

On the US front, the likelihood of the Federal Reserve lowering interest rates has decreased, as indicated by the CME Fedwatch tool. This shift occurred following the release of the inflation report for February. A reduced probability of a rate cut implies that the Federal Reserve may maintain higher interest rates for an extended period. This typically benefits the US dollar.

Investors are paying close attention to US economic data, especially the upcoming Retail Sales report. They want to get more clues about what the Federal Reserve might do with its monetary policy.

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

USD/JPY - Technical Analysis

On March 14, the USD/JPY pair edged higher, trading up by 0.13% at 147.94. This subtle yet significant move highlights the ongoing fluctuations and investor sentiment in the currency markets.

The pair is currently navigating through a critical technical landscape, with the pivot point set at 147.62. This level serves as a baseline for determining the near-term market direction. Resistance is observed at 148.20, 149.10, and 149.82, marking potential hurdles for upward movements. Conversely, support levels are established at 146.72, 145.89, and 144.76, offering cushions that could arrest any downward trends.

The technical indicators provide a balanced perspective. The Relative Strength Index (RSI) is at 53, suggesting a neutral market momentum with a slight tilt towards buying interest. Meanwhile, the 50-day Exponential Moving Average (EMA) at 148.23 closely aligns with the first resistance level, indicating a pivotal point for future price action. Given this setup, a cautiously bearish outlook emerges, recommending a selling strategy below 148.206, with a take-profit target at 146.722 and a stop loss at 148.880.

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