**USD/JPY Could Slide Towards 145.85 – UOB Group Analysts**
*Originally reported by FXStreet and authored by Pablo Piovano*
Analysts at UOB Group have provided updated insights on the USD/JPY currency pair, predicting a potential decline in the short term. Based on their assessment, the pair could retreat towards the 145.85 level. Their analysis is grounded in recent market movements, trend evaluations, and momentum indicators. This article presents a detailed breakdown of UOB Group’s technical and fundamental outlook on USD/JPY, alongside additional context to better understand currency pair dynamics and market behavior.
## Key Takeaways from UOB’s Analysis
– **Current Price Action**: USD/JPY is showing signs of weakness following previous bullish attempts. The currency pair was unable to sustain momentum above the 147.00 resistance level.
– **Short-Term Outlook**: There is potential for the USD/JPY pair to decline to approximately 145.85, a level identified as a key support zone.
– **Momentum and Trend Indicators**:
– Downward momentum has started to build.
– A break below the current support could trigger a sharper decline.
– **Immediate Resistance**: The near-term resistance is marked by the 147.30 level.
– **Timeframe for Forecast**: UOB’s analysts suggest that the bearish outlook remains valid for at least the next one to two days.
## Contextual Background: USD/JPY Overview
To provide further insight into the outlook suggested by UOB analysts, it is helpful to understand the broader context in which USD/JPY is operating.
### Recent Performance of the Pair
USD/JPY has gained significant ground throughout 2023 and into 2024 due to diverging policy directions between the Federal Reserve and the Bank of Japan.
– **USD Strength**: Supported by interest rate hikes from the U.S. Federal Reserve and stronger-than-expected economic data.
– **JPY Weakness**: The Bank of Japan has maintained an ultra-loose monetary policy stance, including negative interest rates until recently and an ongoing commitment to yield curve control.
Despite strong bullish pressure that drove the pair close to the 150.00 psychological mark, concerns about governmental intervention and profit-taking behaviors have occasionally slowed or reversed upward momentum.
## Technical Analysis Breakdown
UOB’s outlook is largely based on their technical models, with analysis drawn from momentum oscillators, support and resistance levels, and candlestick behavior.
### Support and Resistance Levels Identified:
– **Immediate Resistance**: 147.30
– **Primary Support**: 146.10
– **Target Support on Breakdown**: 145.85
The level of 145.85 is significant as it marks a former consolidation zone where previous dips found temporary support. A confirmed break below this level would represent a clear shift in short-term sentiment.
### Momentum and Indicators:
UOB points out that downward momentum is gaining strength:
– **MACD Divergence**: The Moving Average Convergence Divergence indicator suggests a possible bearish divergence, indicating a potential price reversal or momentum loss.
– **RSI Levels**: Relative Strength Index values have started retreating from overbought conditions, lending credibility to a short-term bearish perspective.
– **Candlestick Patterns**: Price rejection around 147.30 and the formation of bearish engulfing patterns on shorter timeframes suggests increasing selling pressure.
## Fundamental Drivers That Could Influence USD/JPY
In addition to technical indicators, several macroeconomic and geopolitical factors continue to influence the performance of USD/JPY.
### U.S. Economic Factors:
– **Interest Rate Expectations**: The Federal Reserve’s hawkish stance has been a significant driver of USD strength. However, expectations are beginning to shift slightly as economic data shows mixed signals.
– Recent inflation data has remained above target, but signs of labor market cooling could influence the Fed’s decisions in upcoming sessions.
– **U.S. Treasury Yields**: With yields
Explore this further here: USD/JPY trading.