The following article is a rewritten and expanded version of the USD/JPY Mid-Day Outlook originally published by ActionForex.com. Full credit goes to the original author for the analysis and market insight. This version further explores the technical and fundamental factors impacting the currency pair and extends the commentary to exceed 1000 words for a more comprehensive understanding.
USD/JPY Mid-Day Analysis: Extended Technical and Fundamental Outlook
Overview
The USD/JPY currency pair continues to exhibit range-bound behavior within a broader bullish trend. As of the time of writing, the pair trades above short-term support levels, maintaining a consolidative tone since reaching recent highs near 160.00. Market participants are closely watching for momentum cues, especially given the Bank of Japan’s cautious stance toward policy normalization and ongoing strength in the US dollar.
Current Technical Landscape
– USD/JPY remains in a consolidative phase off the high of 160.20, established recently as the highest level since 1990.
– Current price action suggests that the pair is digesting gains before potentially staging another upside move. However, upside momentum appears to be slightly diminished on the shorter timeframes.
– The 4-hour chart shows that price action is currently holding above the 55-period Exponential Moving Average (EMA), which acts as a dynamic support level. This reinforces the bullish bias as long as this level is defended.
– Immediate support lies at 156.12 (the low of the current consolidation), followed by a more substantial level at 154.53, which serves as a key near-term structural support.
– On the upside, a break above 160.20 would confirm resumption of the broader uptrend and open the path toward the long-standing resistance level of 161.80.
Short-term Outlook
– For now, intraday bias remains neutral due to the consolidative nature of the recent price action.
– A decisive move above the 160.20 resistance would shift the bias to the upside and confirm that the upward trend has resumed.
– Conversely, a break below 156.12 would indicate that the pair is entering a deeper corrective phase, with potential declines extending toward 154.53.
Medium- to Long-Term Technical Perspective
– From a broader perspective, the pair remains in a primary uptrend, having recovered strongly from the 140.25 low posted in December 2023.
– Sustained strength above the 55-day EMA and the establishment of higher highs and higher lows signal continued bullish momentum.
– The long-term projection following the breakout above 151.90 points to a potential run towards 161.80, a level that corresponds with the 61.8% projection of the move from 127.21 (January 2023 low) to 151.90 (November 2023 high), extended from the 140.25 bottom.
– It is worth noting that even with temporary corrections, the underlying bullish structure would remain intact as long as USD/JPY holds above the 148.80-149.00 support region.
Fundamental Influences
The USD/JPY pair is being influenced by a mixture of monetary policy divergence, geopolitical risk, inflation expectations, and risk sentiment in global markets. Below are the main themes currently impacting the pair:
1. Monetary Policy Divergence
– The Federal Reserve has continued to express caution with regard to rate cuts, considering sticky inflation and robust employment data in the United States.
– As a result, the US dollar remains supported by relatively high interest rate differentials, which are particularly attractive to yield-seeking investors.
– In contrast, the Bank of Japan maintains an extremely accommodative monetary policy stance and has only cautiously begun the process of tightening, with a historic rate hike in March 2024 — the first rate increase in over 17 years.
– This divergence in interest rates is a core driver of the sustained uptrend in USD/JPY.
2. Japanese Government Intervention Speculation
– Japanese authorities have expressed concern about the rapid depreciation of
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