USD/JPY Price Analysis – Sep 26, 2023

Daily Price Outlook

During the early European session on Tuesday, the USD/JPY currency pair has been gaining traction and is trading near 148.90, which is close to an 11-month high. However, the reason for its surge can be attributed to the strengthening of the US Dollar, driven by cautious market sentiment and higher US Treasury yields.

Investors are considering the Federal Reserve's hawkish stance on the trajectory of interest rates, and this is factored into their trading decisions. Hence, the anticipation of higher interest rates in the US is bolstering the USD/JPY pair.

USD/JPY Currency Pair Poised for Strength Amid Surging US Dollar and High Yields

The broad-based US dollar, as represented by the US Dollar Index (DXY), has been surging above 106.00, hitting its highest point since November. However, this uptrend was mainly driven by the strong performance of US Treasury yields. Specifically, the yield on the 10-year US bond note has reached 4.56%, a level not seen since October 2007. This increase reflects the expectation of sustained high interest rates, underpinned by the resilience of the US economy.

In the meantime, the US Federal Reserve has signaled its readiness to implement further interest rate hikes if necessary, bolstering the dollar's strength more. Hence, this action is likely to favor a bullish outlook for the USD/JPY currency pair.

Challenges for Japanese Yen (JPY) Amid BoJ Policy and Economic Choices

On the flip side, the Japanese Yen (JPY) is facing challenges as the Bank of Japan (BoJ) sticks with its super-low monetary policy to help the economy reach a 2% inflation goal. This suggests the central bank is not rushing to reduce its massive stimulus efforts. Japanese Finance Minister Shunichi Suzuki recently discussed Japan's economic situation, highlighting a crucial choice between boosting consumption or encouraging wage growth.

Yoshitaka Shindo, Japan's new Economy Minister, stressed that it's not easy to foresee whether just spending more money by the government will make prices go up. He also highlighted that it's crucial for the currency to move steadily in line with the country's economic basics. Furthermore, Bank of Japan (BoJ) officials underscored that they're willing to wait and keep using strategies like making more money available, which could make the Yen less strong and benefit the USD/JPY pair.

USD/JPY - Technical Analysis

The USD/JPY currency pair is persistently advancing, currently nearing our anticipated target of 149.00. We foresee this bullish momentum extending beyond this level, potentially aiming for the significant milestone at 150.00.

Underpinned by the EMA50's support, our bullish outlook remains intact for the foreseeable future. It's essential to emphasize that sustaining this upward trajectory necessitates the pair remaining above the 147.90 mark.

Today's projected trading boundaries lie between a support at 148.30 and a resistance at 149.80, with an overall bullish sentiment prevailing.