USD/JPY Price Analysis – Sep 19, 2024
Daily Price Outlook
During the European trading session, the USD/JPY currency pair has recently seen a strong upward movement, reaching 143.55, which represents about 0.90% increase for the day. This rise is primarily due to a rebound in the US Dollar (USD), bolstered by a major interest rate cut from the Federal Reserve (Fed).
Investors are keenly observing the USD/JPY pair as it capitalizes on the USD's strength and evolving market expectations about future monetary policies.
Impact of the Fed's First Interest Rate Cut in Four Years on the USD/JPY Pair
As we mentioned above, the Federal Reserve implemented its first interest rate cut in over four years, reducing rates by 50 basis points to a range of 4.75%-5.00%. Fed Chairman Jerome Powell described this cut as a necessary measure to address easing price rises and growing concerns in the job market.
Despite this aggressive cut, the USD experienced some volatility, fluctuating between gains and losses as investors adjusted to the news.
However, the recent rate cut by the Fed has created a mixed impact on the USD/JPY pair as the move initially sparked some market fluctuations, but the USD eventually gained ground against the Japanese Yen.
As a result, the USD Index (DXY) recovered from its multi-month lows and climbed back above the 101.00 mark. However, the Fed's dovish stance and the possibility of further rate cuts later this year could limit the USD's potential for further gains and create some challenges for the USD/JPY pair.
Bank of Japan's Expected Interest Rate Decision and Its Potential Impact on USD/JPY
Looking ahead, the Bank of Japan (BoJ) is expected to keep its interest rates unchanged at its policy meeting ending on Friday. Most economists believe the BoJ will maintain the current rates, with the possibility of a hike later in the year.
This cautious approach is seen as a way to maintain economic stability while waiting for clearer global economic signals.
While the BoJ’s decision to hold rates steady might not cause immediate shifts, the anticipated narrowing of the interest rate gap between the US and Japan could eventually benefit the Japanese Yen (JPY) against the USD.
Investors will be closely watching for any hints of future policy changes from the BoJ that could impact the USD/JPY pair.
USD/JPY - Technical Analysis
USD/JPY is trading at 142.32, up 0.05%, indicating a mild upward trend as the pair holds above key support levels. The immediate resistance is noted at 142.44, with further resistance at 143.17 and 143.97.
On the downside, immediate support is at 140.46, followed by 139.70 and 138.95, marking significant levels where the price could potentially reverse.
The 50-day Exponential Moving Average (EMA) at 141.22 acts as critical support, providing stability for near-term bullish sentiment. The Relative Strength Index (RSI) is currently at 54, reflecting neutral-to-bullish momentum, signaling that the market still has room for further upward movement.
A break above 142.44 could confirm a bullish bias, paving the way toward the next resistance level at 143.17. However, if USD/JPY falls below 140.46, the short-term trend could turn bearish, testing the lower support at 139.70.
The broader outlook for USD/JPY remains influenced by the divergent monetary policies between the U.S. Federal Reserve and the Bank of Japan.
While the Fed signals caution after its recent rate adjustments, the Bank of Japan maintains its dovish stance, providing continued support for the dollar against the yen.
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