Technical Analysis

USD/JPY Price Analysis – Dec 07, 2023

By LonghornFX Technical Analysis
Dec 7, 20233 min

Daily Price Outlook

During the European trading session, the USD/JPY currency pair failed to stop its downtrend, losing further ground as the Japanese Yen (JPY) gained aggressive bids on Thursday. It surged to a three-month high against the US Dollar amidst growing expectations of a shift in the Bank of Japan's (BoJ) policy stance.

BoJ Governor Kazuo Ueda discussed monetary policy, mentioning considerations for wage hikes during a meeting with Japanese Prime Minister Fumio Kishida. This has led to speculation that the BoJ might think about moving away from its long-standing monetary stimulus, given the prospect of significant wage increases for the second year in a row.

Fed Rate Hike Expectations, Job Market Concerns, and Data Ahead

Meanwhile, the Japanese Yen is gaining strength as stock markets weaken, thanks to its safe-haven reputation. Furthermore, the broad-based US dollar is losing ground, bringing the USD/JPY pair to its lowest level since September, dropping below 146.00. Traders are watching the US Weekly Initial Jobless Claims data for potential market impact later in the North American session.

It's worth noting that many expected the Federal Reserve to stop raising interest rates in 2024 as concerns about a slowing economy are rising as signs of a loosening US job market emerge. The US Labor Department reported a 617K decline in job openings to 8.73 million in October, the lowest in two-and-a-half years.

The ADP report revealed a modest 103K job addition in November, reinforcing expectations of a Federal Reserve policy shift and a possible 25 basis points rate cut in March.

Potential Impact on USD/JPY Pair Amidst Gaza Conflict and China Economic Concerns

Moreover, Israeli forces intensified ground operations in southern Gaza, escalating combat against Hamas militants and worsening the humanitarian crisis. Meanwhile, China's mixed Trade Balance data for November revealed an unexpected 0.6% decline in imports, sparking concerns about weak domestic demand amid recession risks.

Therefore, the intensified conflict in Gaza and concerns about China's economic slowdown may lead to increased safe-haven demand for the Japanese Yen, potentially strengthening it against the US Dollar.

 USD/JPY Price Chart – Source: Tradingview
USD/JPY Price Chart – Source: Tradingview

USD/JPY - Technical Analysis

As of December 7, the USD/JPY pair has witnessed a downward shift, decreasing by 0.38% to 146.712. The currency pair, within the context of a fluctuating forex market, is currently grappling with key technical levels that will determine its short-term trajectory. It navigates around a pivotal point at 144.72, with immediate resistance placed at 145.75. Subsequent resistance levels are seen at 147.75 and 148.84, posing potential hurdles to upward movements. On the downside, immediate support is established at 142.71, followed by stronger support levels at 140.82 and 138.76.

The Relative Strength Index (RSI) for USD/JPY is at 41, indicating a bearish sentiment as it remains below the neutral mark of 50. This suggests the pair is not in an overbought state, leaving scope for potential directional changes. The Moving Average Convergence Divergence (MACD) shows a slight positive value of 0.02 against a signal line of -0.14, hinting at a subdued bullish momentum.

Notably, the pair is trading below the 50-day Exponential Moving Average (EMA) of 147.06, further underscoring the bearish bias. The observed downward trendline, extending resistance at 147.350, suggests a continuation of this trend. This pattern indicates that the pair could maintain its bearish stance unless it breaches the 147.350 level.

In conclusion, the technical analysis of the USD/JPY pair points to a bearish trend below the 147.350 mark in the short term. The pair's movements will likely be influenced by a combination of technical indicators, chart patterns, and broader market sentiment, focusing on resistance testing if there is a shift in market dynamics.

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