USD/JPY Price Analysis – Sep 21, 2023

Daily Price Outlook

During early European trading on Thursday, the USD/JPY pair surged above the 148.00 mark, bouncing back from its low of 147.47. However, the reason for its upward movement was mainly fueled by the Federal Reserve's (Fed) hawkish stance in the Wednesday's policy meeting. Besides this, traders seems cautious to place any strong position due to verbal intervention from Japanese authorities earlier in the week. Although the USD is showing strength, these interventions may impact its further rise against the Japanese Yen.

Fed's Steady Rates and "Higher for Longer" Outlook

As we mentioned above, the Federal Reserve held steady on interest rates at their September meeting, maintaining them at 5.25-5.50%. They are growing more confident about taming inflation without harming the economy or causing major job losses. According to their latest quarterly forecasts, there might be one more rate hike this year, bringing the range to 5.50% to 5.75%. Furthermore, they expect rates to remain quite high through 2024, more than previously thought.

Moreover, the Fed updated its Summary of Projections (SEP), showing that they anticipate the interest rate hitting 5.1% by the end of 2024, up from the previous estimate of 4.6%. Hence, this "higher for longer" rate outlook has given the US Dollar a boost against other currencies.

Market Highlights: Upcoming Events and Potential USD/JPY Opportunities

Besides this, the highlight for Friday is the Bank of Japan (BoJ) interest rate decision. It is worth noting that the BoJ is expected to stick with its -0.1% short-term interest rate target and its 10-year bond yield target at around 0%. They have made it clear that they will not consider changes to monetary policy until local wage and inflation data align with their projections.

Meanwhile, traders are being careful because they're concerned about verbal interventions. A former top currency diplomat, Takehiko Nakao, told Reuters that Japanese authorities might step in to help the yen if it gets weaker. Japan's top currency diplomat, Masato Kanda, has also stressed the need to act quickly regarding currency movements. As a result, the Japanese Yen (JPY) is under pressure to weaken, which is good for the USD/JPY pair.

Looking forward, investors will keep their eyes on upcoming events. Notably, thursday will bringsome key economic data, such as US weekly Jobless Claims, the Philly Fed report, and Existing Home Sales. On Friday, all attention will be on the Bank of Japan's (BoJ) meeting decision. Traders will closely watch these events for potential trading opportunities involving the USD/JPY pair.

USD/JPY - Technical Analysis

The USD/JPY pair has successfully breached the 147.86 mark and established a daily close above it, enhancing the prospects for sustained bullish momentum in forthcoming sessions. We anticipate a continued upward trajectory, targeting the 149.00 level as our subsequent milestone.

The bullish outlook is further corroborated by the EMA50, which underpins the price, coupled with the favorable convergence signal currently exhibited by the stochastic indicator. It is imperative to maintain a position above the 147.50 level to realize the projected targets.

For today's trading dynamics, we forecast a range defined by a support at 147.60 and a resistance at 149.10, with the prevailing sentiment tilting bullish.