Original article by Kathy Lewis | Source: FXDailyReport.com
Title: USD/JPY Rebounds from Intraday Lows, Maintains Strength Near 147.61
The USD/JPY currency pair showed resilience during its latest trading session by recovering from its earlier lows and reaffirming upward pressure. After a brief dip, the pair found renewed interest from buyers, causing it to rally back to approximately 147.61. This behavior reflects broader trends in the global foreign exchange market as traders remain focused on interest rate expectations, central bank policy, and macroeconomic indicators.
Here is an in-depth analysis of the USD/JPY movement, the underlying factors influencing its trajectory, and what market participants can expect moving forward.
Market Overview: USD/JPY at 147.61
The USD/JPY currency pair opened the session with a soft tone, dropping to an intraday low near 147.36 due to muted demand for the US dollar. However, the downturn was short-lived. As the session progressed, buying interest in the US dollar returned, prompting the pair to bounce back and hover near the key 147.61 level.
Key Drivers Behind USD/JPY’s Movements
Several macroeconomic and policy-related factors influenced the pair’s sharp recovery:
• US Treasury yields: A rebound in US Treasury bond yields supported the dollar, bolstering its appeal among investors seeking yield advantage. The 10-year note, in particular, showed modest gains, contributing to the pair’s upward swing.
• Central bank divergence: The contrast between the US Federal Reserve and the Bank of Japan’s policy stances continues to underpin the pair’s longer-term bullish trend. While the Fed remains relatively hawkish, suggesting the possibility of future interest rate hikes or maintaining current levels for a prolonged time, the BoJ upholds an ultra-dovish approach with negative interest rates and ongoing quantitative easing.
• Risk sentiment: Despite ongoing concerns around global economic outlooks, equity markets have remained stable, providing a neutral backdrop for JPY’s safe-haven status. With no major shocks encouraging capital flows into the yen, the dollar remains attractive.
• Technical support areas: The intra-day low at 147.36 aligned with a previous technical support region, which encouraged short-term buying activity and prevented deeper losses. This behavior shows that traders are closely watching chart levels for entry points.
Economic Indicators and Upcoming Events
The pair’s performance is also tied to several important economic indicators out of both the United States and Japan. Here’s a summary of the recent and upcoming data points influencing market sentiment:
• US CPI figures: Inflation data remains a focal issue. Investors await confirmation on whether price pressures are declining, which would allow the Fed to take a less aggressive policy stance. Any upside surprises in core inflation could reignite dollar buying.
• Japanese GDP data: Japan’s preliminary gross domestic product report can either confirm or challenge the economic divergence narrative. Weak economic growth would reinforce the BoJ’s dovish tone, favoring further upside in USD/JPY.
• US jobless claims: A tight labor market continues to give the Fed leeway to keep monetary policy restrictive. Weekly jobless figures are being watched closely for signs of weakening demand.
• Wages and household spending in Japan: Domestic consumption in Japan is a key factor in future monetary policy. If wages remain stagnant and spending weakens, it would deter the BoJ from scaling back its accommodative stance.
Technical Analysis of USD/JPY
The technical outlook for USD/JPY remains constructive despite earlier weakness. The pair’s ability to recover quickly from intraday losses has fortified its near-term bullish bias.
Key chart metrics include:
• Support levels:
– 147.36: The intraday low from the current session, now acting as short-term support.
– 146.80: A key technical base formed over recent sessions.
– 145.90: A psychological and technical support level tested several times in recent
Explore this further here: USD/JPY trading.