Technical Analysis

USD/JPY Price Analysis – March 21, 2024

By LonghornFX Technical Analysis
Mar 21, 20243 min

Daily Price Outlook

The USD/JPY currency pair has been experiencing mixed performance lately, struggling to find a clear direction. This could be attributed to various factors, including uncertainty in global markets, geopolitical tensions, fluctuations in interest rates, or changes in monetary policies by central banks. It's worth noting that the potential for an early rate hike by the Bank of Japan, coupled with improved confidence among Japanese companies, especially in the manufacturing and service sectors, is positive for the Japanese Yen. This contributed to the mild losses in the USD/JPY currency pair.

Furthermore, the risk-on sentiment, backed by the U.S. Federal Reserve indicating it would stick with its plans to cut interest rates, undermined the safe-haven Japanese yen. This was seen as a key factor that kept the lid on any additional losses in the USD/JPY currency pair.

BoJ's Dovish Hike and the Risk-On Mood

It's worth noting that the recent dovish stance by the Bank of Japan (BoJ), along with a prevailing risk-on mood in the market, has exerted downward pressure on the USD/JPY currency pair. The BoJ's decision to maintain accommodative monetary conditions without offering clear guidance on future rate hikes has weakened the Japanese Yen.

Besides this, the risk-on sentiment among investors, driven by positive market sentiment and an improved economic outlook, has further diminished the safe-haven appeal of the Yen. This makes it harder for the USD/JPY pair to rise as traders stay careful due to uncertain monetary policies and global market changes.

Post-FOMC USD Selling Bias and its Impact on USD/JPY Pair

Following the Federal Reserve's announcement of its intention to implement three interest rate cuts by the end of the year, the US Dollar experienced a selling bias. Despite a modest uptick in US Treasury bond yields, the US dollar remained near a one-week low. Fed Chair Jerome Powell, in a press conference after the meeting, highlighted ongoing low inflation despite recent high readings, which pushed the USD down further. This means the USD weakened because the Fed plans to lower interest rates, and Powell's comments about inflation kept the pressure on the currency.

Therefore, the USD/JPY pair likely experienced downward pressure due to the Federal Reserve's rate cut plans and concerns over inflation, leading to a weakened US dollar against the Japanese yen.

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

USD/JPY - Technical Analysis

In the recent trading session on March 21, the USD/JPY pair experienced a modest downturn, decreasing by 0.24% to close at 150.941. This movement places the pair below its critical pivot point at 151.73, signaling a potential shift in market sentiment. Despite this slight retreat, the currency pair faces immediate resistance levels at 151.77, followed by 152.50 and 153.30, indicating potential barriers to upward movement. On the downside, support is found at 149.63, with subsequent levels at 148.95 and 148.20, which could provide some stability in case of further declines.

Technical analysis highlights a supportive backdrop for the USD/JPY, with an upward trendline near the 150.530 level suggesting an underlying strength. A doji candle closing above this trendline could catalyze a renewed buying interest, particularly if the pair sustains above the 150.530 threshold. Both the 50-Day Exponential Moving Average (EMA) at 149.59 and the Relative Strength Index (RSI) at 62 reinforce the potential for a bullish trajectory. Traders should closely monitor these key technical markers and market dynamics, which will likely dictate the short-term direction of the USD/JPY pair in the forex market.

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