Technical Analysis

USD/JPY Price Analysis – Nov 16, 2023

By LonghornFX Technical Analysis
Nov 16, 20233 min

Daily Price Outlook

During the early part of the European session, the USD/JPY pair turned positive for the second successive day after an intraday dip to the 151.10 area on Thursday. It touched a two-day high in the early part of the European session. However, spot prices lack follow-through buying and remain below the mid-151.00s.

BoJ's Cautious Approach and USD Strength Impact on USD/JPY Pair

The Japanese Yen (JPY) is currently underperforming in comparison to the US Dollar (USD), largely attributed to the Bank of Japan's (BoJ) more cautious approach. The BoJ has opted to maintain negative interest rates and is not hastily altering its substantial monetary support measures, rendering the Yen less appealing to investors. This, coupled with a robust US Dollar, is contributing to the upward momentum of the USD/JPY pair. Unlike several other major central banks, the BoJ is steadfast in its current strategies, adhering to a dovish stance, thereby reinforcing the prevailing strength of the USD/JPY pair.

Therefore, the cautious stance of the Bank of Japan and the presence of negative interest rates, combined with the strength of the US Dollar, contribute to the USD/JPY pair's resilience by diminishing the attractiveness of the Yen to investors.

US Economic Trends and Market Sentiment Impacting USD/JPY Dynamics

On Wednesday, better-than-expected US Retail Sales data signaled a positive economic trajectory. This supported the Federal Reserve's (Fed) cautious stance, reinforcing the US Dollar (Greenback) and contributing to the USD/JPY pair's strength for a second day. Market sentiment leans towards the Fed avoiding interest rate hikes, with some expecting potential cuts in H1 2024. This sentiment is evident in the recent drop in US Treasury bond yields, hindering significant US Dollar movements. Furthermore, the shift to less optimistic market sentiment could boost demand for the safe-haven Japanese Yen, limiting the USD/JPY pair's upward potential.

Therefore, the upbeat US Retail Sales data reinforced the USD/JPY pair, aligning with the Fed's cautious stance. Nevertheless, expectations of 2024 rate cuts and declining bond yields may constrain USD gains against the safe-haven Japanese Yen.

Market Dynamics and Cautious Optimism for USD/JPY

Traders are uncertain about Japan intervening to prevent its currency from dropping, adding to the hesitancy in boosting the USD/JPY pair. Investors are keen on US updates, particularly in the early North American session, with Thursday's schedule featuring Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, and Industrial Production figures.

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

USD/JPY - Technical Analysis

In today's session, the USD/JPY pair exhibits a slight increment, trading at approximately 151.275, revealing a modest 0.05% rise within a four-hour timeframe. The pair showcases an ongoing battle between bullish and bearish forces at a crucial juncture marked by a pivot point of 150.942.

The current technical landscape presents a nuanced narrative; the RSI, stationed at 48.36, portrays a market in balance, potentially gearing up for a decisive move. The MACD echoes this sentiment, indicating an emergent bullish trend as it approaches the signal line. Meanwhile, the price floats above the 50 EMA, suggesting an underlying bullish tone.

This analysis points towards a cautiously optimistic outlook for the USD/JPY pair. Investors may expect the pair to test the immediate resistance level in the near term, provided the bullish indicators prevail and the market sustains its current momentum above pivotal technical markers.

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