Title: USD/JPY Rebounds from Intraday Lows to Hold Near 147.61 Amid Mixed Market Signals
By: FXDailyReport.com (Original author credited)
The USD/JPY currency pair witnessed a modest recovery from its earlier session lows during recent trading, finding support at key levels that tempered the selling pressure and helped the pair stabilize around the 147.61 mark. This recovery occurs in a broader context of uncertainty characterized by shifting interest rate expectations, differing central bank policies, and fluctuating investor sentiment as markets respond to a dense calendar of U.S. economic data.
After slipping to intraday lows during the Asian and European sessions, primarily due to increased appetite for risk-off assets and a moderate decline in U.S. Treasury yields, the pair found enough support to stem further losses. Investors are closely watching upcoming macroeconomic data from the United States that could either reinforce or challenge the Federal Reserve’s cautious outlook on further interest rate hikes.
Key Developments Affecting the USD/JPY Pair
Several key factors contributed to USD/JPY’s price movement during the session:
• Diminished Risk Appetite:
– Early in the session, safe-haven demand picked up, pushing the Japanese yen higher against the dollar.
– Global markets appeared jittery amid geopolitical tensions and increasing fears of economic slowdowns in major economies such as China and the Eurozone.
• U.S. Treasury Yields:
– The benchmark 10-year U.S. Treasury yield edged lower, reducing the attractiveness of dollar-denominated assets.
– Lower yields generally reduce demand for the dollar and may support funding currencies such as the yen.
• Cautious Market Awaiting Economic Data:
– Traders positioned themselves conservatively ahead of key U.S. economic data releases, including personal consumption expenditures (PCE), nonfarm payrolls, and services PMI.
– These indicators are expected to provide further clues about the health of the U.S. economy and the likely path of monetary policy.
• Federal Reserve Policy Outlook:
– The Federal Reserve has recently adopted a data-dependent approach, with mixed signals from policymakers and no clear consensus on additional rate hikes.
– Recent remarks from Fed officials suggest growing caution about tightening policy too far, especially amid signs that inflation is gradually moderating.
• Japanese Fundamental Developments:
– The Bank of Japan (BoJ) remains committed to its ultra-loose monetary policy, even as inflation has exceeded its 2% target for more than a year.
– Any potential indication of policy normalization by the BoJ could push the yen higher, but so far, the central bank has stayed silent on any timeline for rate hikes.
Market Reactions and Short-Term Technical Outlook
The recent bounce from session lows leaves USD/JPY technically positioned for a potential consolidation phase or limited upside in the short term. The pair’s rebound off support levels points to still-strong dollar demand, though upside appears restrained by softening Treasury yields and tempered Fed expectations.
From a technical standpoint:
• Immediate Resistance and Support:
– Resistance lies near the psychological level of 148.00 followed by the September high around 148.80.
– First support is near 147.30, the intraday low. A sustained breach below this could expose the pair to 146.50-146.70 levels.
• Indicators Show Neutral to Slightly Bullish Bias:
– The relative strength index (RSI), while off overbought territory, remains above 50, indicating that buying interest is not entirely gone.
– Moving averages continue to suggest a bullish bias, with the 50-day moving average well above the 200-day average.
• Consolidation Zone Established:
– The pair has carved out a trading range roughly between 147.00 and 148.50 over the past week.
– A breakout from either side of this range could dictate the next short-term trend.
Investor Sentiment and Positioning
Despite uncertainties about the Fed’s path forward
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