USD/JPY Price Analysis – Sep 12, 2024
Daily Price Outlook
During the European trading session, the USD/JPY currency pair broke its two-day losing streak, trading around 142.90.
This recovery can be attributed to rising odds of a smaller interest rate cut by the Federal Reserve (Fed) in September, which has supported the US Dollar (USD).
The recent remarks by Bank of Japan (BoJ) board member Naoki Tamura, stating that there is "no preset idea on the pace of further rate hikes," kept the Japanese Yen (JPY) subdued.
Impact of BoJ’s Gradual Rate Hikes and USD Strength on USD/JPY:
The BoJ's gradual approach to rate hikes contrasts with the more aggressive policies of the US and Europe. While Tamura’s comments reinforced the notion of a slower tightening cycle in Japan, the exact timing of when rates will reach 1% remains dependent on Japan’s economic and price conditions.
Meanwhile, the USD gained strength due to diminishing expectations of a larger Fed rate cut, contributing to the USD/JPY rally.
US CPI Report and Fed Rate Cut Expectations Drive USD/JPY:
On the US front, the August Consumer Price Index (CPI) showed headline inflation dropping to a three-year low of 2.5% year-on-year. Despite this, core inflation remained steady, reducing the likelihood of a significant rate cut by the Fed.
According to the CME FedWatch Tool, the probability of a 50 basis point rate cut has sharply declined to 15%, with markets now fully anticipating a 25 bps cut at the September meeting.
This outlook has provided upward momentum for USD/JPY, as expectations of gradual monetary easing by the Fed bolster the USD against the Yen.
USD/JPY - Technical Analysis
USD/JPY is currently trading at 142.817, up by 0.32%, as the pair continues to strengthen alongside the U.S. Dollar.
On the 4-hour chart, the price remains above the 50-day Exponential Moving Average (EMA) at 142.61, which provides key support, keeping the bullish momentum intact.
The pair has shown some consolidation but maintains an overall upward trend, with potential for further gains if resistance levels are cleared.
Immediate resistance lies at 143.51. A break above this level could open the door for further upside, targeting higher resistance zones at 144.24 and 145.16.
The Relative Strength Index (RSI) is currently at 55, signaling moderate bullish momentum, leaving room for additional upward movement.
On the downside, immediate support is found at 141.69. If this level fails, the next support sits at 140.70, with a potential deeper pullback toward 139.78 if selling pressure intensifies.
A break below these levels could signal a bearish reversal, though the current uptrend is supported by the 50 EMA at 142.61.
In conclusion, USD/JPY maintains a bullish outlook as long as it stays above the pivot point at 142.36. Traders should watch for a break above 143.51, which could trigger further gains, while a fall below 141.69 could signal a near-term bearish shift.
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