This article is a rewritten and expanded version of the original analysis posted on ActionForex.com, authored by ActionForex Staff. You can find the original article here.
USD/JPY Mid-Day Outlook
The USD/JPY pair continues its upward momentum, currently trading near its recent highs. The pair has shown resilience in maintaining its bullish stance despite fluctuating global economic indicators and monetary policy outlooks from major central banks. As of the latest update, the uptrend remains structurally intact, with price action driven by diverging monetary policies between the Federal Reserve and the Bank of Japan (BoJ), alongside risk sentiment, economic data, and yield spreads.
Near-Term Technical Overview
– USD/JPY remains supported above the short- to medium-term trendline.
– The bullish breakout past the 152.00 resistance suggests the pair is back on its long-term rally.
– Following the rebound from the corrective low at 151.86, upward momentum has been restored with the recent push towards 157 and beyond.
– Intraday bias remains on the upside, with the next major resistance lying around the 160.00 psychological level.
Technical Indicators
– The Relative Strength Index (RSI) remains in elevated territory but still below overbought levels, suggesting there is room for further upside.
– MACD (Moving Average Convergence Divergence) on daily charts continues to show bullish divergence with histogram bars in the positive region and the line staying above the signal crossovers.
– The pair is well above the 20-day and 50-day moving averages, reaffirming the bullish trend.
Targets and Resistance Levels
– Immediate resistance is now seen at 158.00. A break above this level could open the way to testing the symbolic 160.00 level.
– Sustained break above 160.00 would confirm long-term strength and opens the path to even higher targets, such as 162.00 and 164.00 in the coming weeks.
– On the downside, support lies at 153.60 (previous consolidation base) and then at 151.86, which is the most recent swing low.
– A firm break below the 151.86 level would neutralize near-term bullish bias and likely push the pair back into a corrective mode targeting 149.50 and below.
Fundamental Analysis
The primary driver for USD/JPY remains the policy divergence between the Federal Reserve and the Bank of Japan. While the Federal Reserve continues to maintain a relatively hawkish tone, with market participants expecting rate cuts to be delayed until later in the year, Japan’s central bank continues to uphold an ultra-loose monetary policy, even with sporadic verbal interventions to support the yen.
Federal Reserve Outlook
– The Fed has hinted it remains data-dependent but is in no rush to begin easing financial conditions.
– Upcoming CPI and PPI data releases, along with the core Personal Consumption Expenditures (PCE) index, will be watched closely. Any upside surprise could reinforce expectations that interest rates will remain elevated.
– U.S. Treasury yields have remained elevated, especially at the long-end of the curve, which has provided a fundamental tailwind for the U.S. dollar.
Bank of Japan’s Stance
– The BoJ announced only a modest tightening stance in its last meeting and remains hesitant to raise interest rates significantly.
– Inflation in Japan has picked up but not at a pace that suggests the BoJ will adopt a more aggressive tightening approach. The wage growth outlook and consumption data remain lackluster.
– Japan’s policymakers have issued warnings about volatility in the yen and are prepared to act with interventions, but actual FX market operations have been limited.
Currency Intervention Watch
– With USD/JPY fast approaching the 160.00 mark, Japanese authorities are likely on high alert.
– Historical intervention levels (like 152.00 and 155.00) have been broken recently without direct FX action, which suggests either limited appetite to intervene or an attempt to gauge natural market corrections.
Explore this further here: USD/JPY trading.