USD/JPY Price Analysis – Sep 26, 2024
Daily Price Outlook
During the European trading session, the USD/JPY currency pair has recently experienced a downward trend due to various economic factors and central bank signals.
Traders expect the US Federal Reserve (Fed) to cut interest rates further as inflation eases, which has weakened confidence in the US Dollar (USD) and led to its depreciation against the Japanese Yen (JPY).
In the meantime, the sharp drop in the US Consumer Confidence Index, from 105.6 in August to 98.7 in September, reflects this sentiment.
Meanwhile, the comments from Fed officials about potential rate cuts in 2024 have increased uncertainty, putting further downward pressure on the USD/JPY pair as traders await more economic data.
Japanese Yen Faces Downward Pressure Amid BoJ Delays
On the JPY front, the Japanese Yen (JPY) is facing downward pressure primarily due to expectations that the Bank of Japan (BoJ) will postpone further interest rate hikes.
Recent meeting notes from the BoJ showed that members agree on the importance of watching inflation closely. Some even proposed raising rates to 0.25% to lessen monetary support.
However, most members favor a careful approach, expecting interest rates to stay low for a longer time.
This uncertainty is affecting the JPY's value, making it less strong against other currencies, particularly the US Dollar (USD). Traders are waiting for more data to better understand the BoJ's future plans.
However, the market anticipates that the BoJ will maintain its accommodative stance, creating a challenging environment for the currency pair.
Traders are keenly awaiting upcoming inflation data from Tokyo, as it may offer valuable insights into the BoJ's future policy direction and potentially influence the JPY's performance in the near term.
US Dollar Faces Pressure from Rate Cut Speculations
On the US front, the broad-based US dollar is experiencing additional downward pressure due to increasing expectations for interest rate cuts by the Federal Reserve. The CME FedWatch Tool indicates about a 50% probability of a total of 75 basis points being cut by the end of the year, which has created uncertainty among investors. Federal Reserve officials, including Governor Adriana Kugler and Chicago Fed President Austan Goolsbee, have expressed support for additional rate cuts, which could further weaken the US dollar..
This environment of declining interest rates tends to diminish the attractiveness of the US dollar for investors seeking yield, resulting in reduced demand for the currency. Consequently, the expectations surrounding Fed policy shifts are adversely impacting the USD/JPY pair, leading to a challenging landscape for the dollar amidst ongoing market volatility and economic data releases.
USD/JPY - Technical Analysis
The USD/JPY pair is trading slightly higher at 144.877, marking a modest increase of 0.04% for the day. The pair is hovering near a crucial pivot point at 145.398, which could serve as a turning point for future price action.
Immediate resistance is found just above at 145.409, with further resistance levels at 145.973 and 146.514, which could become significant if the current upward momentum persists.
On the downside, immediate support stands at 143.968, followed by deeper supports at 143.475 and 142.910.
The 50-day Exponential Moving Average (EMA), currently at 144.016, is providing strong dynamic support, suggesting the pair will remain buoyed above this level.
Meanwhile, the Relative Strength Index (RSI) is at 66, signaling that the pair is nearing overbought conditions, a potential indicator of short-term exhaustion.
Traders may consider a buy limit at 144.478, targeting the pivot point at 145.398, with a stop loss at 143.978 to mitigate downside risks. The overall trend remains bullish, as long as the price stays above the 50-EMA.
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