Title: USD/JPY Tests 200-Day Moving Average After Rejection at 150; EUR/JPY Shows Signs of Pullback
Source: Adapted and expanded from an article by Matt Weller, FOREX.com
The USD/JPY currency pair has once again come under pressure after failing to sustain a move beyond the key psychological level of 150.00. This turn of events comes amidst rising volatility in the foreign exchange markets and increased speculation about future monetary policy moves from the United States Federal Reserve and the Bank of Japan (BoJ).
At the same time, the EUR/JPY cross is also showing signs of weakening momentum, suggesting that the broader Japanese yen could be in for a period of support, reversing some of the weakness seen over the past several months.
Here is an in-depth analysis of recent price action in USD/JPY, the key technical levels in play, potential policy influences, and what to watch for in both USD/JPY and EUR/JPY in the near term.
USD/JPY: A Key Psychological Reversal at 150
Historically, the 150.00 level in USD/JPY has served as a crucial psychological barrier. This dynamic level has not only halted bullish advances before but has frequently triggered heightened speculation regarding potential Bank of Japan currency interventions.
In recent trading, USD/JPY climbed toward 150.00, touching an intra-day high of approximately 150.15 before encountering heavy selling pressure. The subsequent decline in the currency pair pushed it back down to test a vital technical support level near the 200-day Moving Average (DMA).
Key factors influencing USD/JPY price action:
– The US dollar initially gained ground as economic data pointed to continued resilience in the US economy. Strong job growth, firm consumer spending, and inflation holding above the 2 percent target have kept the door open for additional Fed hikes or delayed rate cuts.
– However, those expectations have begun to moderate. With recent dovish commentary from Federal Reserve officials and a cooling in key economic indicators, bets on the aggressive continuation of monetary tightening have been reevaluated. The moderating tone contributed to the loss of upside momentum in USD/JPY last week.
– At the same time, the Japanese yen may be seeing early signs of potential strength. The BoJ has maintained an extraordinarily loose monetary policy for years, citing a need to stimulate inflation and economic activity. But with Japan showing early signs of wage growth and upticks in consumer demand, investors are watching for any hints that the BoJ could begin rebalancing its policy stance.
Traders should also keep in mind that any move near or above 150.00 elicits concerns of verbal and potentially actual intervention from Japanese authorities. In 2022 and 2023, Japanese officials repeatedly warned against speculative behavior as USD/JPY broke through multi-decade highs, and direct action eventually followed. This history plays a significant role in how markets react when USD/JPY approaches these levels.
Technical Analysis: USD/JPY at a Crossroads
From a technical perspective, the rejection at 150 has created a clear short-term reversal on the charts. As traders digest both the failure to break higher and the macroeconomic shifts in the US and Japan, the pair is at a key inflection point.
Support and resistance levels to watch in USD/JPY:
– Immediate Resistance: 150.00 – 150.15
– This area has repeatedly capped price rallies. A sustained break above this zone could open the door for a larger bullish continuation, potentially toward 151.00 or higher levels last witnessed in late 2022.
– Current Support: 200-Day Moving Average (~146.70 – 147.00 region)
– The 200-DMA often serves as a long-term trend indicator. A firm close below this level could signal a broader trend reversal or at least a period of consolidation in the pair.
– Deeper Support Levels: 146.00, 144.40, and 142
Explore this further here: USD/JPY trading.