USD/JPY Price Analysis – Oct 17, 2024
Daily Price Outlook
During the European trading session, the USD/JPY currency pair maintained its bullish momentum, holding strong around the 149.80 level. Earlier in the day, the Japanese Yen surrendered modest intraday gains, edging back towards its lowest level since early August. This decline was triggered by disappointing data showing Japan's exports fell in September for the first time in 10 months, raising concerns about weakening global demand.
Adding to the pressure, Japanese Prime Minister Shigeru Ishiba's unexpected opposition to further rate hikes complicated the Bank of Japan's efforts to move away from its ultra-easy monetary policy.
Meanwhile, a positive sentiment in equity markets further undermined the Yen’s safe-haven appeal. On the other hand, the US Dollar held firm, bolstered by expectations of modest rate cuts by the Federal Reserve next year and supported by strong US Treasury yields, which kept the USD/JPY pair comfortably above the 149.50-149.55 range.
Weak Japanese Export Data and Political Uncertainty Pressure the Yen
On the JPY front, the Japanese Yen faces pressure due to Prime Minister Shigeru Ishiba’s unexpected opposition to further rate hikes. This adds uncertainty to the Bank of Japan’s (BoJ) plans to exit its long-standing ultra-easy monetary policy. A recent Reuters poll indicates that most economists expect the BoJ will hold off on raising interest rates again this year, given the uncertainty over the new political leadership’s stance on monetary policy.
Adding to the Yen's challenges, data from Japan's Ministry of Finance revealed that exports fell by 1.7% in September, missing expectations and marking the first decline in 10 months. This drop was influenced by weak demand from China, Japan's biggest trading partner, and a slowdown in the US economy.
The Yen's recent appreciation following the BoJ's interest rate hike in July also impacted export values. While this complicates the BoJ's rate hike plans, geopolitical risks from the Middle East may still offer some support for the Yen.
Consequently, the combination of weak Japanese export data and political uncertainty around future rate hikes is keeping the Yen under pressure, which supports the US Dollar. As a result, the USD/JPY pair remains strong, trading above the 149.50 level.
Impact of US Economic Conditions and Middle East Tensions on the USD/JPY Pair
On the US front, the US Dollar hit its highest level since early August due to expectations of a more gradual easing of Federal Reserve policy. Investors are betting on a potential 25 basis points rate cut at the Fed's November meeting. Although the yield on the 10-year US government bond dropped to a one-week low, it remains above 4.0%, which supports USD strength and helps keep the USD/JPY pair well-supported.
In the Middle East, tensions are rising as the United Nations reported Israeli forces firing at its peacekeeping troops, injuring over a dozen in southern Lebanon. A potential Israeli counterstrike, following Iran's October 1 attack, is reportedly prepared, increasing fears of broader regional conflict.
Traders are also watching for key US economic data, including Retail Sales, Weekly Jobless Claims, and the Philly Fed Manufacturing Index, which could impact market sentiment during the North American session.
Therefore, the rising US Dollar strengthens against the Yen, supported by expectations of a rate cut and resilient bond yields. Meanwhile, escalating tensions in the Middle East may further boost demand for the safe-haven Yen, adding volatility to the USD/JPY pair.
USD/JPY – Technical Analysis
The USD/JPY pair is trading at 149.598, down 0.10% for the day, hovering near the critical pivot point at 150.24. Immediate resistance is seen at 149.97, and a break above this level could open the door for further gains toward 150.59 and 151.17.
The 50-day Exponential Moving Average (EMA) at 149.37 acts as crucial support, helping maintain a bullish outlook. The RSI is at 55, signaling neutral-to-slightly bullish conditions. Traders are closely watching the 150.24 pivot point for signs of a breakout.
If the pair clears this level, bullish momentum could accelerate, while a failure may push USD/JPY toward the support at 148.47.
For a short-term strategy, traders could consider entering a buy position above 149.052, targeting a take-profit level of 150.24. A stop-loss at 148.37 is recommended to limit downside risks.
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