Daily Price Outlook
During the European trading session, the USD/JPY pair remains on an upward trend, trading near multi-month highs around 157.55 level, driven by a combination of factors.
However, the Federal Reserve's hawkish stance has been a key driver, as it continues to signal a commitment to maintaining elevated interest rates to combat inflation.
This has widened the US-Japan interest rate differential, favoring the higher-yielding USD over the Japanese Yen (JPY). In addition, strong US economic indicators, including robust Treasury yields, have further bolstered the demand for the greenback.
Another factor is the Bank of Japan's (BoJ) cautious approach to tightening monetary policy. Despite recent inflation data from Japan showing resilience, the BoJ has reiterated its gradual stance on rate hikes.
Governor Kazuo Ueda has emphasized the need for more data on wage growth before committing to aggressive rate adjustments. This uncertainty surrounding the BoJ's actions has made the JPY less attractive to investors.
The broader market sentiment also leans in favor of the USD/JPY pair. A generally positive risk tone has reduced demand for safe-haven assets like the JPY. Meanwhile, the US Dollar has maintained its strength, even shrugging off slightly weaker US consumer confidence data.
BoJ's Dovish Policies Keep JPY Struggling
On the BOJ front, the BoJ's cautious monetary policies are weighing heavily on the Japanese Yen. Minutes from the central bank's October meeting highlighted a deliberate and measured approach to rate hikes, potentially extending into late fiscal 2025.
While there is speculation about a possible rate increase in January or March, markets remain doubtful about any immediate action.
Japan's Finance Minister, Katsunobu Kato, has raised concerns about recent currency volatility and hinted at potential interventions.
However, such warnings have done little to provide a sustained boost to the Yen, as investors remain focused on the growing divergence between US and Japanese interest rates.
Geopolitical Risks and Intervention Concerns
Despite the bullish momentum of the USD/JPY pair, fears of Japanese authorities intervening in the currency markets have capped the pair's upside potential. Additionally, geopolitical uncertainties and trade war fears create a mixed outlook for the JPY.
While these factors have kept some traders cautious, the overall trend for the USD/JPY pair remains upward, supported by the Fed's firm stance and the BoJ's slow-paced policy shifts.
USD/JPY – Technical Analysis
The USD/JPY is trading at 157.361, up 0.04%, reflecting a slight upward momentum. The pair remains above the pivot point at 156.932, signaling bullish potential if it maintains this level.
Immediate resistance lies at 157.923, with higher targets at 158.742 and 159.672 if the bullish trend continues. On the downside, immediate support is located at 155.965, with subsequent levels at 155.004 and 154.152, which could be tested if the pair reverses lower.
The Relative Strength Index (RSI) stands at 65, indicating strong bullish momentum but nearing overbought territory.
The 50-day Exponential Moving Average (EMA) at 156.769 supports the upward trend, serving as a key dynamic support level. Traders should watch for a decisive move above the immediate resistance at 157.923 to confirm further gains.
The pair’s price action suggests a positive bias, but caution is warranted as the RSI nears overbought levels. Holding above the pivot at 156.932 reinforces bullish momentum, with the potential to challenge higher resistance zones.
Related News
- AUD/USD Price Analysis – Dec 26, 2024
JOIN LHFX TODAY
24/7 live support, lightning fast withdrawals, guaranteed safe and reliable trading platforms with a true ECN broker.