Original Article Credit: Matt Weller, FOREX.com
Article Source: https://www.forex.com/en-us/news-and-analysis/153-remains-pivotal-for-usd-jpy-aud-usd-stabilises-with-wall-street-bounce/
Title: USD/JPY Key Resistance at 153 Remains Crucial as AUD/USD Stabilizes with Wall Street Momentum
As global markets absorb recent economic data and investor sentiment remains on edge, key currency pairs such as USD/JPY and AUD/USD are experiencing notable technical and sentiment-driven developments. Traders are closely monitoring pivotal price levels, especially as macroeconomic indicators continue to suggest varying directions for the U.S. and global economies. With the U.S. dollar showing signs of strength and risk assets attempting to stabilize, the focus is now on interpreting market behavior within these trends.
USD/JPY – Pivotal Resistance at 153
The Japanese yen has weakened considerably since the start of 2024, pressured by the diverging monetary policies of the Federal Reserve and the Bank of Japan (BoJ). The USD/JPY pair has gradually climbed toward critical resistance near the 153 level. However, this area is proving to be a key battleground for traders, and its outcome may determine the near-term direction of the yen and dollar.
Key Factors Influencing USD/JPY:
– The Federal Reserve’s posturing on interest rates suggests a prolonged pause or even further tightening if inflation proves stubborn. Despite markets pricing in rate cuts for later in 2024, current commentary and data have not fully aligned with that narrative.
– Japan’s monetary policy remains ultra-loose. The BoJ has not signaled any significant deviation from its yield curve control and negative interest rate policy.
– The consistent divergence has bolstered USD/JPY, putting increasing pressure on Japanese policymakers and potentially the Ministry of Finance to address excessive yen depreciation.
Technical Overview of USD/JPY:
– The 153 level remains a historical pressure point in the USD/JPY market. Prices approaching this threshold have stirred speculation over possible BoJ intervention.
– The pair has failed to break and sustainably hold above 153 on multiple occasions over the past two years.
– Traders see this as a psychological and technical ceiling that, if overcome, could open the door to further dollar strength and yen weakness.
– Key support is seen in the 151.50 to 152.00 area. A break below this zone could suggest weakening momentum in the pair, prompting potential repositioning among long-dollar entrants.
Potential Market Scenarios:
– Bullish USD/JPY: A confirmed breakout above 153 with sustained daily closes above this level could encourage a rally toward the next Fibonacci extension and historical resistance zones near 155.
– Bearish USD/JPY: Failure to breach 153 and a drop below 151.50 may suggest a reversal or stall, prompting traders to reconsider the timing of additional BoJ support actions or a broader drop in U.S. Treasury yields.
Fundamentals Supporting the Trend:
– The resilience of U.S. economic data, particularly labor market strength and inflation persistence, has propped up U.S. Treasury yields. Higher yields attract global capital flows, favoring the dollar over the yen.
– Meanwhile, the Bank of Japan remains hesitant to tighten policy despite signs of moderately improving inflation domestically. Its recent policy meetings have offered little indication of rate hikes, reinforcing bearish sentiment on the yen.
As the pair continues to test this pivotal resistance, all eyes will remain fixed on capital flows, central bank commentary, and the potential for renewed speculation about Japanese intervention or shifting global monetary dynamics.
AUD/USD – Supported by Wall Street Rebound but Still Vulnerable
The Australian dollar found some temporary relief thanks to a bounce in Wall Street equity markets, which soothed overall risk sentiment. However, despite this short-term stabilization, AUD/USD remains vulnerable due to structural concerns in China and divergent growth expectations between the U.S. and Australia.
Context Around AUD/USD Price Action:
– The Australian
Explore this further here: USD/JPY trading.