Credit: ActionForex.com
USD/JPY Mid-Day Outlook – Technical Analysis and Market Commentary
The USD/JPY currency pair is showcasing a relatively stable performance at mid-day, as it continues to trade within a clearly defined range just shy of recent yearly highs. Though the pair has not shown a strong inclination to make a new breakout today, it remains firmly underpinned by supportive economic narratives and broader technical momentum.
As observed, intraday trading has maintained a sideways consolidation pattern, signaling a temporary pause in bullish momentum rather than any reversal. The structural support of the pair remains intact, keeping the USD/JPY outlook tilted to the upside.
Current Technical Position and Intraday Trend
– USD/JPY stands at around 157.50 levels during mid-day trading.
– The pair has been confined between 157.20 support and 157.75 resistance so far.
– Momentum indicators such as RSI (Relative Strength Index) and MACD (Moving Average Convergence Divergence) suggest consolidation but not an immediate trend reversal.
Key Technical Observations
– Immediate support is noted at 156.71, which has acted as a robust level on intraday pullbacks.
– Key resistance is marked at 157.70. A clear break above this could open the door towards 160.00 psychological levels.
– On the daily chart, the 10-day EMA (Exponential Moving Average) has maintained a consistent upward slope below the price, providing dynamic support near the 155.80 range.
– The upward channel drawn from April’s lows remains unbroken, with price action continuing to respect the lower bound of the channel.
Market Sentiment
– The current market sentiment appears to favor the US dollar against the Japanese yen amid diverging monetary policy stances.
– The Federal Reserve continues to project a higher-for-longer interest rate stance based on resilient inflation data and strong labor market indicators in the United States.
– In contrast, the Bank of Japan has continued its accommodative monetary policy framework, providing very little upward impetus to the yen from a fundamental standpoint.
Fundamental Drivers Supporting USD Strength
– US economic data has remained broadly supportive of the greenback:
• Recent Non-Farm Payrolls showed robust job growth exceeding expectations.
• The Core PCE Price Index, a key inflation gauge watched by the Federal Reserve, remains elevated, supporting the case for tighter monetary policy.
• Services and manufacturing PMIs point to continued expansion in the economy, fostering positive USD sentiment.
– Divergence in monetary policy:
• The Federal Reserve has signaled fewer rate cuts through 2024 compared to initial market expectations.
• The Bank of Japan, by contrast, maintained its accommodative stance and hinted at no immediate rate hikes, thereby widening the interest rate differential between the two economies.
– Safe haven flows:
• Though the Japanese yen traditionally benefits from safe haven demand, investors have favored the USD in current global risk-off periods due to its higher yield profile and economic resilience.
Technical Structure and Trend Analysis
– The trend remains firmly bullish on the daily and weekly timeframes. While short-term consolidation occurs, the broader structure points to potential resumption of the uptrend.
– Key Fibonacci retracement levels have provided solid guidance:
• The 50% Fibonacci retracement of the March-May rally lies near 154.80, acting as a critical support zone.
• The next bullish extension, should the pair break above 157.75, could aim for 100% Fibonacci projection at 160.32.
– Indicators Analysis:
• RSI on the 4-hour chart is holding above 50, suggesting a mild bullish tone.
• The MACD histogram is showing declining positive momentum, hinting at some short-term exhaustion but not a definitive reversal.
• Moving averages remain positively aligned, with the 20-period and 50-period EMAs both trending upwards below current price levels, reinforcing the medium-term bullish bias.
Possible Scenarios
1. Bull
Explore this further here: USD/JPY trading.