USDJPY pair stages a nice intraday recovery from the 139.40-139.35 range.
The USDJPY pair stages a nice intraday recovery from the 139.40-139.35 range, or a one-week low hit on Thursday. And trades only a few points below the daily high heading into the European session. For the time being, spot prices appear to have paused the recent decline from the 142.00 level. And are subject to the price dynamics of the US Dollar (USD). There is widespread agreement that the Federal Reserve (Fed) is nearing the conclusion of its current policy tightening cycle. The USD fell for the third day in a row, retreating from a two-week peak reached on Tuesday. The US Federal Reserve, on the other hand, left the door open for another interest rate rise in September or November. Which helps the Greenback recover some of its intraday losses and offers support to the USDJPY pair.
The positive market sentiment underpins the JPY and gives support notwithstanding a small USD rise.
It is worth noting that the US Federal Reserve boosted interest rates by 25 basis points to the 5.25%-to-5.50% range. The highest in 22 years, citing still-high inflation as justification. Furthermore, the central bank emphasized improved US inflation and reaffirmed. That future rate rises will be reliant on economic indicators. Fed Chair Jerome Powell stated during the post-meeting press conference: that the economy must still slow and the labor market deteriorate for inflation to return to the 2% objective credibly. Powell also minimized the likelihood of a US recession this year. This, together with China’s vow to provide further assistance to strengthen its economy. Enhances investor confidence, undermining the safe-haven Japanese Yen (JPY). And assisting the USDJPY pair to attract some buyers at lower levels.
Important US macro announcements are expected to provide some momentum ahead of the critical Bank of Japan decision on Friday.
The JPY is also under pressure from predictions that the Bank of Japan (BoJ) would maintain its ultra-easy-money policy. Indeed, Bank of Japan Governor Kazuo Ueda stated on Wednesday. That the central bank will maintain its accommodating monetary policy. And that the long-term interest rate is constant under the yield curve control (YCC) policy. This is another element that contributed to the USDJPY pair’s intraday rebound of about 70 pips. Spot prices, on the other hand, lack positive confidence and remain in the negative for the fourth consecutive day. Necessitating some prudence before positioning for any additional intraday appreciating move. Ahead of the critical BoJ monetary policy decision. Which is due to be issued on Friday. Meanwhile, traders on Thursday will take cues from significant US macro data. Which will be released later in the early North American session.
The Advance Q2 GDP print, together with Durable Goods Orders and the customary Weekly Initial Jobless Claims, will be released on the US economic calendar, followed by Pending Home Sales. The data might have an impact on USD price dynamics and offer some momentum to the USDJPY. Aside from that, the wider risk attitude may generate short term possibilities, while market players may resist from taking strong directional bets as the big central bank event risk approaches.
Technical Outlook
Technically, the USDJPY pair is retaining some strength below the 50% Fibonacci retracement level of the recent strong rebound from sub-138.00 levels, or the monthly low. The succeeding rise higher, however, fails to break through the 38.2% Fibo. level, which is located around the 140.25 zone.
Bulls may wait for sustained strength over the mentioned barrier before preparing for further gains. Spot prices might then break above the 140.50 barrier, accelerating momentum towards the 140.80 intermediate resistance, or the 23.6% Fibo level, on route to the 141.00 level. The latter stands for the daily chart’s 100-period Simple Moving Average (SMA), which if convincingly passed might tilt the bias in favor of bullish traders and pave the way for future rises.
On the other hand, the Asian session low, around 139.40-139.35, currently appears to safeguard the immediate downside ahead of the 61.8% Fibo. level, around 139.00. A convincing breach below may result in intense technical selling and be viewed as a new trigger for bearish traders. The USDJPY pair may then become susceptible, accelerating its decline towards the 138.00 level before returning to the monthly low around the 137.30-137.25 range. The latter now corresponds with the 100-day SMA and is followed by the crucial 200-day SMA, which is currently in place. around the 136.80 zone. Some follow-through selling will pave the way for the current steep corrective slide from the 145.00 psychological barrier, or the YTD top reached in June, to resume.
