Daily Price Outlook
During the Asian session on Thursday, the USD/JPY pair faced selling pressure, breaking its two-day winning streak and sliding to around 147.75 after hitting a weekly high. However, the decline can be attributed to expectations that the Bank of Japan (BoJ) will shift away from its ultra-easy monetary policy, boosting the Japanese Yen (JPY) and weighing on the pair. Furthermore, the ongoing uncertainty surrounding the Federal Reserve's rate-hike plans is leading to US Dollar selling, further contributing to the pair's downward movement.
BoJ Policy Shift Boosts JPY Strength
It is important to note that the Japanese Yen is gaining strength due to expectations that the Bank of Japan (BoJ) will move away from its super-easy monetary policy. This is putting pressure on the USD/JPY currency pair. It should be noted that people in the market are now thinking that the central bank might stop its policy of controlling interest rates and negative rates as early as this year. This came after the BoJ Governor Kazuo Ueda's comments over the weekend. He hinted that they might raise interest rates if they're confident that prices and wages will keep rising. This caused Japanese government bond yields to go up, supporting the JPY and contributing the USD/JPY currency pair.
Market Uncertainty Impacts USD/JPY Pair
Across the ocean, the ongoing uncertainty about the Federal Reserve's future interest rate hikes is causing some US Dollar selling, which is affecting the USD/JPY pair. However, the recent US consumer inflation data suggests the Fed will keep rates steady at its upcoming meeting. Notably, inflation remains a concern, leaving the possibility of another rate increase by year-end. Market pricing suggests a greater than 50% chance of a 0.25% rate hike in either November or December. This could stop USD bears from aggressive selling and help limit losses for the USD/JPY pair.
Looking forward, traders will keep thier eyes on key US economic reports, including Weekly Jobless Claims, the Producer Price Index (PPI), and monthly Retail Sales. These releases could provide new momentum for the USD/JPY currency pair.
USD/JPY - Technical Analysis
The USD/JPY pair has decisively surpassed the 146.90 threshold, signaling a resurgence of the primary bullish trajectory. This movement is in line with the bullish channel delineated on the chart, enhancing the probability of eclipsing the recent peak of 147.86 and steering towards the 149.00 region as the forthcoming key target.
The 50-day Exponential Moving Average (EMA50) lends positive reinforcement to the pair, underscoring the anticipated upward trend in subsequent sessions. However, it's crucial to note that a breach below the 146.90 mark, followed by a drop past 146.35, could thwart the projected ascent and redirect the pair back to a corrective bearish path.
For today, the trading spectrum is projected to oscillate between a support at 146.70 and resistance at 148.20.
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