Original article by TradingNews.com
Title: USD/JPY Price Forecast: Dollar Weakens, Yen Rises Toward 146
The USD/JPY currency pair has come under notable pressure, with the Japanese Yen gaining strength against the US Dollar. The pair is currently hovering around the 146 level as a combination of economic data, central bank expectations, and market sentiment drive volatility in the forex market.
Recent Movements in USD/JPY
– The USD/JPY fell from multi-month highs near 151 to current levels near the 146 handle.
– The decline was triggered by growing expectations that the Federal Reserve may take a less aggressive stance on interest rate hikes.
– Japan’s central bank remains committed to its ultra-loose monetary policy but recent economic indicators suggest a shift may be on the horizon.
– Risk sentiment in global markets, along with US Treasury yields, continues to exert influence on the pair’s price action.
Factors Behind the Yen’s Strength
1. Declining US Treasury Yields
– One of the key reasons for the USD’s weakness is the fall in US Treasury yields.
– As yields decline, the attractiveness of the dollar as an interest-bearing asset diminishes.
– Lower returns on US investment instruments weaken demand for the greenback relative to low-yielding currencies like the Yen.
2. Dovish Fed Signals
– Minutes from the latest Federal Reserve meeting suggest that policymakers are willing to pause or slow rate hikes if economic conditions soften.
– Weakening inflation and slowing labor market data support the notion that the Fed’s aggressive tightening cycle may be nearing its end.
– As the market prices in fewer rate hikes or even possible cuts in 2024, the USD loses support.
3. Economic Resilience in Japan
– While the Bank of Japan (BoJ) has long resisted raising rates, recent economic indicators hint at some resilience in Japan’s economy.
– A stronger Q1 GDP print and improved manufacturing data are encouraging.
– Markets are also weighing the possibility of the BoJ adjusting its yield curve control policies in response to inflation.
4. Verbal Intervention from Japanese Officials
– Japanese policymakers have become more vocal in addressing the rapid depreciation of the Yen seen earlier this year.
– The Ministry of Finance and BoJ have issued statements warning about excessive currency moves.
– These comments generate speculation that direct FX intervention could be on the table if current trends persist.
Technical Analysis of USD/JPY
The recent slide in USD/JPY suggests that technical momentum has shifted in favor of the Japanese Yen. Traders are closely watching key support and resistance levels.
Key Levels to Watch:
– Resistance Zones:
– 148.25: Previous support turned resistance from earlier in March.
– 150.00: Psychological resistance level and a major round number.
– 151.00: Year-to-date highs and multi-decade highs.
– Support Zones:
– 145.50: Recent intra-day low and near-term support level.
– 144.80: A critical level that served as support in the past.
– 143.00: A longer-term support region dating back to Q4 2023.
Indicators Suggest Bearish Bias:
– The Relative Strength Index (RSI) on the daily chart has turned lower, indicating fading bullish momentum.
– The price is trading below the 50-day moving average for the first time in several weeks, a signal of potential trend reversal.
– Moving Average Convergence Divergence (MACD) levels show bearish crossover, suggesting more downside is possible.
Market Sentiment and Positioning
Speculative positioning, as seen in CFTC data and broker sentiment tools, reveals that:
– Net long positions in USD have decreased amid fading Fed rate hike bets.
– Traders have trimmed their bearish Yen positions, indicating a shift toward more neutral outlooks.
– Retail
Explore this further here: USD/JPY trading.