Title: USD/JPY Retreats from Session Highs, Trades Around 146.99
Source: FXDailyReport
Original Author: Gail Schumacher
Original link: https://fxdailyreport.com/usd-jpy-pulls-back-off-session-highs-to-trade-at-about-146-99/
Overview:
The USD/JPY currency pair witnessed a pullback from its intraday highs, settling at around the 146.99 level. After experiencing a notable rally earlier in the trading session, the pair showed signs of consolidation as investors became more cautious in their approach. Market sentiment, risk appetite, and expectations surrounding monetary policy from both the U.S. Federal Reserve and the Bank of Japan (BoJ) are influencing the pair’s movements. This article provides a detailed analysis of the USD/JPY pair, including technical forecasts and fundamental drivers.
Price Movement Summary:
– Intraday high: The pair initially pushed higher during the session, reflecting robust bullish momentum.
– Retreat: Prices started to decline as buyers lost steam, leading to a retracement toward the 146.99 level.
– Market dynamics: The pullback is influenced by a combination of technical resistance, mixed risk sentiment, and shifting monetary policy expectations.
Fundamental Analysis:
The directional bias for USD/JPY continues to be shaped by diverging central bank policies and broader macroeconomic conditions.
1. U.S. Federal Reserve Policy Outlook:
– Market participants are closely monitoring Federal Reserve commentary for clues on future interest rate decisions.
– Despite signs of cooling inflation, the Fed remains cautious, maintaining a data-dependent stance, which has left investors uncertain about potential rate cuts.
– Strong economic indicators from the U.S., such as favorable labor market data and solid GDP growth, provide support for the U.S. dollar.
– However, recent dovish expectations following mixed inflation readings have capped the USD’s upside.
2. Bank of Japan Stance:
– The BoJ has remained committed to its ultra-loose monetary policy, although subtle changes in tones from officials have generated speculation of future adjustments.
– Persistent inflation above the BoJ’s target is raising pressure for policy normalization.
– However, any substantial shift from the BoJ is likely to be gradual, keeping the Japanese yen broadly on the defensive.
3. Global Risk Sentiment:
– USD/JPY has long been sensitive to risk-on or risk-off sentiment.
– In times of geopolitical uncertainty or heightened market volatility, safe-haven flows into the yen tend to strengthen the currency.
– Conversely, improved market sentiment usually supports USD advances at the expense of the yen.
Technical Analysis:
The USD/JPY pair remains heavily influenced by key technical levels that traders are closely monitoring.
1. Support and Resistance:
– Immediate resistance lies at the recent session high near 147.50. A break above this level could signal renewed bullish momentum.
– On the downside, initial support is seen around 146.50, with further support near the psychological 146.00 mark.
2. Trend Indicators:
– Moving Averages:
– The pair remains above its 50-day Simple Moving Average (SMA), indicating a continuation of the medium-term uptrend.
– The 200-day SMA lies well below current levels, also supporting the bullish bias.
– Relative Strength Index (RSI):
– RSI readings remain below the overbought threshold, suggesting there is room for further upside without signaling overextension.
– Momentum:
– While recent price action shows fading momentum, the longer-term trend remains intact unless key support levels break.
3. Fibonacci Levels:
– Traders are using Fibonacci retracement levels to gauge potential reversal or continuation points.
– A key Fibonacci level on the 4-hour chart – the 38.2 percent retracement of the latest bullish leg – offers support near 146.50.
4. Chart Patterns:
– Price action suggests the formation of a potential bullish flag pattern, which
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