The USD/JPY currency pair has been a subject of market scrutiny, and its outlook remains influenced by various factors. This analysis delves into the intricate dynamics affecting USD/JPY trading.
Current State of USD/JPY
Intraday bias for USD/JPY is currently neutral, focusing on crucial support and resistance levels. The market’s direction hinges on the pivotal 145.97 resistance-turned-support level. A rally is favoured as long as this support holds, with a potential uptrend resumption towards the key resistance zone at 148.79. However, if 145.97 is decisively breached, the bias may shift towards a deeper decline to revisit 140.25.
Bank of Japan’s Influence
The Bank of Japan (BoJ) plays a significant role in shaping the USD/JPY trajectory. Recent BoJ commentary regarding inflation, wages, and interest rates has caught the market‘s attention. The BoJ’s cautious optimism regarding wage growth and inflation and plans to exit negative interest rates have implications for the currency pair. Hawkish forward guidance from the BoJ on these matters could impact investor sentiment and buyer appetite for USD/JPY.
US Jobs Report and Rate Cut Expectations
Another critical factor is the upcoming US Jobs Report, which can potentially sway investor bets on a Federal Reserve rate cut in March. Economists forecast nonfarm payrolls to increase in January, with expectations for the unemployment rate and average hourly earnings. Weaker labour market conditions could trigger rate cut expectations, affecting USD/JPY.
Technical Analysis and Short-term Forecast
Technical indicators offer insights into USD/JPY’s near-term and longer-term prospects. The currency pair currently hovers above the 50-day and 200-day Exponential Moving Averages (EMAs), signalling bullish sentiment. A break above the 146.649 resistance level could propel USD/JPY towards 148.405. Conversely, a break below the 50-day EMA may target the 144.713 support level.
The 14-day Relative Strength Index (RSI) suggests a bullish momentum, while the Moving Average Convergence Divergence (MACD) indicates a potential shift in market sentiment. Traders should monitor these technical indicators for a clearer direction.
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