USD/JPY Price Analysis – Oct 10, 2024

Daily Price Outlook

During the European trading session, the USD/JPY currency pair struggled to gain positive traction despite a bullish US dollar.

This downward trend can be attributed to the official data released today, which indicated that Japan's Producer Price Index (PPI) remained unchanged in September, while the annual rate increased more than anticipated.

This data is seen as providing some support for the JPY. Meanwhile, the US dollar consolidates its recent strong gains, reaching an eight-week high as traders await the release of the latest US consumer inflation figures.

This bullish sentiment surrounding the US dollar may help the USD/JPY pair limit deeper losses moving forward.

Mixed Economic Data and Uncertainty Weigh on JPY, Allowing USD/JPY Pair to Rise

On the JPY front, recent data shows that Japan's Producer Price Index (PPI) remained unchanged in September, contrary to expectations of a 0.3% decline. The annual rate, however, unexpectedly rose from 2.6% in August to 2.8%. This information is seen as providing some support to the Japanese Yen (JPY).

In the meantime, data released on Tuesday revealed that real wages in Japan fell in August after two months of gains, along with a drop in household spending. These factors raise concerns about the strength of private consumption and the sustainability of economic recovery.

Adding to this uncertainty, Japanese Prime Minister Shigeru Ishiba made blunt comments regarding monetary policy, which have fueled doubts about the Bank of Japan's plans for a rate hike. This situation has weighed on the Japanese yen, allowing the USD/JPY pair to rise.

Furthermore, a quarterly survey from the Bank of Japan showed that while 85.6% of Japanese households expect prices to rise over the next year, this figure is down from 87.5% in the previous survey. This slight decrease offers some support to the yen but reflects ongoing concerns about inflation expectations.

Therefore, the mixed economic data and uncertainty surrounding Japan's monetary policy have contributed to a weaker JPY, enabling the USD/JPY pair to rise. The decline in household spending and real wages raises concerns about Japan's economic recovery, further supporting this upward movement.

US Dollar Strengthens as FOMC Minutes Signal Cautious Approach to Rate Cuts

On the US front, the US dollar has risen to its highest level since August 16, driven by the hawkish minutes from Wednesday's Federal Open Market Committee (FOMC) meeting. Some policymakers expressed a preference for only a 25 basis point rate reduction due to ongoing concerns about elevated inflation.

Moreover, Boston Fed President Susan Collins mentioned that the Fed's policy will remain data-dependent and stressed the importance of maintaining healthy labor market conditions.

San Francisco Fed President Mary Daly noted that the size of the September rate cut does not determine future cuts and suggested that one or two more reductions might occur this year if the economy progresses as anticipated.

Market participants, according to the CME Group's FedWatch Tool, are now pricing in a higher chance of a 25 basis point cut in November, with more than a 20% probability of holding rates steady.

Investors are now awaiting the US Consumer Price Index (CPI) release, as well as the Producer Price Index (PPI) due on Friday, which could impact expectations for the Fed's rate-cutting path and influence the USD/JPY pair.

USD/JPY - Technical Analysis

The USD/JPY pair is trading at 149.386, up 0.06%, maintaining a bullish bias as it hovers near recent highs. On the 4-hour chart, the pair is holding above the key pivot point at 149.009, suggesting continued upward momentum.

If USD/JPY manages to break above the immediate resistance at 149.759, it could potentially aim for the next resistance levels at 150.494 and 151.244, marking a potential new multi-year high.

The pair’s bullish momentum is further supported by the 50-day Exponential Moving Average (EMA) at 146.506, which is significantly below the current price, indicating strong underlying support.

Additionally, the Relative Strength Index (RSI) is currently at 72, placing the pair in overbought territory. While this suggests the possibility of a short-term pullback, it also highlights the strength of the current bullish trend.

If USD/JPY reverses direction and fails to hold above the pivot point at 149.009, immediate support can be found at 148.275, followed by deeper support levels at 147.349 and 146.200.

A breach below these levels could signal a bearish reversal, but as long as the pair remains above the 50-day EMA, the overall outlook stays positive.

Given the strong uptrend and high RSI, traders should watch for potential profit-taking or consolidation near the 150 level. The current technical setup indicates that any dips may be considered as buying opportunities, provided the pair holds above 148.275.

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