Technical Analysis

USD/JPY Price Analysis – May 2, 2024

By LonghornFX Technical Analysis
May 2, 20243 min

Daily Price Outlook

During the European trading session, the USD/JPY currency pair has shown mixed performance, currently hovering around 154.73 and consolidating within a range of 154.22 to 156.29. This fluctuation has been influenced by various factors, primarily the divergent policy outlooks of the Bank of Japan (BoJ) and the Federal Reserve (Fed).

While the BoJ has indicated a commitment to supporting the economy through accommodative monetary policy measures, the Fed has hinted at potential interest rate hikes, albeit with a cautious approach.

These contrasting approaches by the central banks have contributed to the pair's uncertain performance, with traders closely monitoring developments for further guidance on its future direction.

Japanese Yen Rallied Amid Speculations of Intervention

On the JPY front, the Japanese yen rallied amid speculation of intervention by Japan's financial authorities. However, the reports suggested that authorities may have intervened to support the yen, leading to a temporary boost in the currency's value.

This intervention impacted the USD/JPY pair, causing it to trim some of its intraday gains. However, the momentum was short-lived as expectations of a wide US-Japan rate differential dampened the yen's strength.

Positive Risk Tone Undermines Safe-Haven JPY

Another factor that has been boosting the USD/JPY pair was the generally positive risk tone in the market, which undermined the safe-haven appeal of the Japanese Yen and contributed to the USD/JPY pair's gains.

Investors' appetite for riskier assets has increased, leading to a decrease in demand for safe-haven currencies like the JPY. This shift in market sentiment has acted as a tailwind for the USD/JPY pair, limiting any significant appreciation of the yen.

US Dollar Selling and Fed's Policy Outlook

On the US front, the mild bearish US Dollar, driven by receding fears about further interest rate hikes by the Federal Reserve, has also had an impact on the USD/JPY pair.

The Fed's dovish stance, highlighted by its recent statements and the lack of change in forward guidance, has led to a decline in the USD's value. This has provided some support to the JPY and limited the upside potential of the USD/JPY pair.

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

USD/JPY - Technical Analysis

In today's trading, the USD/JPY has shown notable strength, climbing to 155.377, a gain of 0.58%. This movement marks a substantial shift, positioning the currency pair close to significant technical levels that could dictate the next phase of market activity.

The pivot point for USD/JPY is identified at $156.07. Above this mark, the immediate resistance level lies at $156.89. Should bullish momentum persist, the pair may encounter further resistance at $157.95 and $159.06.

These levels represent potential turning points where selling pressure could intensify. On the downside, initial support is seen at $154.60, with additional support levels at $153.60 and $152.60, which could provide a cushion if the price retreats.

From a technical standpoint, the Relative Strength Index (RSI) is at 41, indicating a lack of momentum as it trends towards the lower half of the neutral range. The 50-day Exponential Moving Average (EMA) at $156.00 is closely aligned with the current price, suggesting a critical juncture for trend determination.

Considering the current market setup and technical indicators, traders might consider a cautious approach. The recommended strategy includes selling below the pivot point of $156.072, targeting a take profit at $154.579, while placing a stop loss at $156.852 to protect against unexpected upward movements.

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