Title: USD/JPY Breaks Above Key Resistance at 158.80 with US CPI, BOJ Policy, and FX Intervention Looming
Original Author: Kenny Fisher, MarketPulse
Link: https://www.marketpulse.com/markets/chart-alert-usdjpy-breaking-15880-key-resistance-as-us-cpi-looms-with-intervention-risk/
The USD/JPY currency pair has surged above the key resistance level of 158.80, raising trader consciousness about potential volatility stemming from the US Consumer Price Index (CPI) report, possible Federal Reserve policy shifts, and regular intervention warnings from the Japanese government and Bank of Japan (BOJ). The price movement underscores the complexity of the global monetary environment as central banks prepare for potential policy inflection points while managing currency fluctuations.
This move further intensifies speculation over whether Japanese authorities will intervene in the forex market again, as they did earlier in 2024. The current trajectory is seen as significant due to inflation uncertainty in the United States and investor anticipation surrounding the Bank of Japan’s upcoming policy decisions.
Below is an in-depth analysis of the current USD/JPY setup, potential drivers, technical outlook, risk of government intervention, and key events to monitor in the days ahead.
Overview of USD/JPY Price Movement
– The USD/JPY has broken a critical resistance zone at 158.80 for the second time this year, signaling renewed bullish momentum and prompting scrutiny from market regulators and traders alike.
– Price action suggests growing upward pressure, with technical indicators showing strong buying interest above this level.
– The currency pair is approaching a psychologically significant level near 160.00, where Japanese authorities previously stepped into the forex market to halt the yen’s depreciation.
Breaking Down the Price Action
– The USD/JPY move was initiated by a strong US dollar, driven by persistent inflation data and fading hopes of substantial Federal Reserve rate cuts.
– Recent bounce above 158.80 shows resilience in dollar demand despite warnings from Japanese officials.
– On May 1 and May 2, Japanese authorities intervened to support the yen as USD/JPY approached levels above 160. Although temporary dips followed, the upside rebounded quickly in the following sessions.
– The dollar-yen pair is now trading near levels where market participants expect elevated probability of another round of official intervention.
Technical Analysis: USD/JPY Structure and Trend
– As per Kenny Fisher’s evaluation in MarketPulse, the daily chart reflects sustained bullish pressure.
– The 158.80 level previously acted as key horizontal resistance. Having converted this into support, it now presents a possible launching point for further gains.
– Key technical indicators point to upside continuation:
• The Relative Strength Index (RSI) is climbing but has not yet reached overbought territory, leaving room for further upside.
• USD/JPY remains entrenched above its 50-day and 100-day moving averages, signaling consistent uptrend strength.
• Price action remains well above former consolidation ranges, removing short-term technical barriers to 160.00.
– Critical Resistance:
• Immediate resistance now lies at 160.00, a round psychological figure and the multi-decade high reached before previous intervention.
• A firm breakout above 160.00 could expose 161.50 as the next bullish target.
– Immediate Support:
• 158.80 remains the primary support; a break below would signal bullish momentum weakening.
• Below that, further support sits near 157.00, a short-term floor for the recent USD rally.
Macroeconomic Factors Influencing USD/JPY
A range of macroeconomic drivers is contributing to the current yen depreciation and dollar strength, including:
1. US Inflation and Federal Reserve Rate Expectations
– The US CPI data scheduled for release today is highly anticipated. Market consensus projects core CPI to remain sticky, which would strengthen the dollar further.
– The Federal Reserve has communicated a cautious outlook, continuing to see
Explore this further here: USD/JPY trading.