USD/JPY Price Analysis – Sep 12, 2023

Daily Price Outlook

The USD/JPY currency pair extended its upward rally and attracted more buying interest, pushing it above the recent levels. However, this rally can be linked to the increased demand for the US Dollar, which is providing strong support to the USD/JPY pair. It's worth noting that the upward movement is mainly driven by the emergence of USD buying, acting as a significant tailwind for the pair. Across the ocean, the worries about intervention and a cautious market mood support the Japanese yen (JPY) and limit gains for the USD/JPY pair.

USD/JPY Reacts to BoJ Governor's Comments and Policy Outlook

The USD/JPY pair initially reacted positively to Bank of Japan (BoJ) Governor Kazuo Ueda's hawkish comments, but this optimism faded quickly. Many in the market believe that the Japanese central bank will maintain its current policies until next summer. Ueda mentioned the option of ending negative interest rates if he's confident in rising prices and wages. However, Hiroshige Seko of Japan's ruling party prefers loose monetary policies. Seko noted that Ueda believes policy changes will only happen after reaching the 2% inflation target. This eases concerns about an immediate BoJ policy shift, and, coupled with some US Dollar (USD) buying, supports the USD/JPY pair.

Factors Influencing USD/JPY Pair's Direction

Apart from this, the Federal Reserve's potential future tightening of policies is boosting US Treasury bond yields and increasing demand for the US dollar (USD). Although the Fed is expected to pause its rate hikes in September, markets still think there might be one more 25 bps increase in 2023. The strong US economic data and persistent inflation suggest the Fed may maintain higher interest rates. Moving on, the upcoming US CPI report on Wednesday will be closely watched for clues on the Fed's future rate hike plans, influencing the USD/JPY pair's near-term direction.

Hence, this news is likely to exert upward pressure on the USD/JPY currency pair. The Federal Reserve's potential tightening of policies, coupled with expectations of another rate increase in 2023, is boosting demand for the US dollar (USD). (edited)

USD/JPY - Technical Analysis

The USD/JPY pair exhibited pronounced bearish activity yesterday, breaking through the 146.55 mark to touch 145.90. However, it has since oscillated around the initial level, influenced by the fading positive momentum of the stochastic indicator. Additionally, the EMA50 exerts downward pressure on the price.

Given these dynamics, we are inclined to forecast continued bearish tendencies in forthcoming sessions. It's imperative to note that our subsequent primary target stands at 145.55. Any breach beyond 146.90 would negate the anticipated decline, potentially realigning the pair with its primary bullish trajectory. Today, we project a trading range between a support level of 145.80 and resistance at 147.40.