Technical Analysis

USD/JPY Price Analysis – Nov 02, 2023

By LonghornFX Technical Analysis
Nov 2, 20233 min

Daily Price Outlook

The USD/JPY currency pair extended its downward trend and continued to lose traction, drifting lower for the second consecutive day on Thursday. However, the reason for its selling pressure can be attributed to a weaker US dollar, which was being pressured by the expectation that the Fed has stopped raising rates. Meanwhile, the declining US bond yields was seen as another key factor that has exerting downward pressure on the Greenback.

US Dollar Weakening Due to Fed's Rate Outlook and Jerome Powell's Comments

It's important to highlight that the US Dollar is weakening due to the belief that the Federal Reserve (Fed) is nearing the end of its strategy to raise interest rates. This situation is causing a decline in the USD/JPY pair. As we mentioned earlier, the Fed recently opted to maintain the current interest rates for the second consecutive time. Nonetheless, they haven't dismissed the potential for future rate hikes due to the better-than-anticipated performance of the US economy.

However, the Chair of the Fed, Jerome Powell, stated in a press conference following the meeting that the recent surge in borrowing costs influenced by the market could potentially harm the economy. He also mentioned that financial conditions are already quite tight, indicating that they may not require further rate hikes and could even consider lowering them by June of next year.

Consequently, the anticipation of fewer future rate increases from the Fed is leading to a decrease in US Treasury bond yields, which, in turn, is weakening the US dollar and contributing to the losses in USD/JPY pair.

Japanese Authorities and the Bank of Japan's Approach Impacting USD/JPY Pair

Moreover, there are concerns that Japanese authorities may intervene in the foreign exchange market to manage their currency's strength as they aim to prevent it from weakening excessively. This adds to the downward pressure on the USD/JPY pair. However, the Bank of Japan (BoJ) maintains a more lenient stance, which might assist in mitigating the losses.

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

USD/JPY - Technical Analysis

The USD/JPY is currently navigating around the 150.445 mark, reflecting a modest 24-hour shift of +0.01%. Within the 4-hour chart, the pivot point stands at $150.262. On the resistance spectrum, the closest barrier is $151.062, with subsequent ones at $151.500 and $151.741. In contrast, supports are seen at $150.258, $149.903, and $149.444.

Technical indicators offer intriguing insights. The RSI, at 49.08, hints at a slight bearish tilt but is close enough to the 50 mark to suggest potential shifts in momentum. The 50-Day EMA sits at $150.262, with the price around it indicating a neutral market stance. Chart patterns, especially the emerging symmetrical triangle, signal a tussle between the bulls and bears. The triangle's upper boundary is set to be a focal point in upcoming sessions.

Conclusively, the USD/JPY's current trend leans towards neutrality with a mild bullish undertone. Immediate challenges lie in approaching the resistance at $151.062. Still, the existing support levels play a crucial role in defining the asset's trajectory amidst global economic influences.

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