USD/JPY Price Analysis – Feb 22, 2024

Daily Price Outlook

The USD/JPY currency pair has been losing its traction and failed to stop its downward trend as it is currently trading below the 150.10 level. However, the reason for its downward trend can be attributed to multiple factors like the bearish US dollar and the hawkish stance by the BoJ Governor Kazuo Ueda, which boosted the JPY and contributed to the USD/JPY pair's losses. Whereas, the US dollar's decline has played a major role in undermining the USD/JPY pair. In contrast to this, the risk-on market sentiment could help the USD/JPY pair by undermining the safe-haven Japanese yen.

Detailed Analysis of the Current Economic Conditions and Factors Impacting the Japanese Yen (JPY)

It is worth noting that Japanese authorities and Bank of Japan Governor Kazuo Ueda have backed the Japanese Yen (JPY) verbally. This means that Japan's Finance Minister Shunichi Suzuki restated on Thursday that the government is closely observing fluctuations in the foreign exchange market with great urgency, which helps to bolster the Japanese Yen. However, concerns about Japan entering a recession have tempered hopes for a change in the Bank of Japan's policy stance.

On the data front, a recent survey showed that Japan's factories continued to decline for the ninth month in a row in February. This was mainly because new orders fell sharply. The au Jibun Bank flash Japan Manufacturing PMI dropped to 47.2 from 48.0, and the services sector gauge fell from 53.1 to 52.5. The combined Composite PMI was 50.3, indicating that overall business activity was stagnant. This drop shows a decrease in optimism among companies, with the report mentioning the lowest level of confidence since January 2023. Meanwhile, the Japanese Cabinet Office also lowered its economic outlook in February, the first downgrade since November 2023.

Therefore, the Japanese Yen is strengthening against the US Dollar due to verbal support from authorities and economic concerns, with Japan's factory activity declining for nine months.

USD Struggles Amid Fed Rate Cut Expectations

Furthermore, the US dollar is having trouble attracting buyers and remained under pressure despite hawkish stance by Fed. The minutes from the January FOMC meeting revealed that officials are cautious about cutting rates too soon. They want to be sure that inflation is falling before considering rate cuts, suggesting the Federal Reserve will keep rates higher for longer. Traders expect rate cuts to possibly begin in June, leading to higher US Treasury bond yields. This increase in the 10-year bond yield, the highest since November 30, boosts the US Dollar and offers more support to the currency pair.

USD/JPY - Technical Analysis

The USD/JPY pair on February 22nd is showing modest fluctuations, with the current price slightly down by 0.05% at $150.205. The currency pair, often seen as a barometer of investor sentiment towards the US dollar against the yen, is experiencing a tug-of-war between different market forces, reflected in the delicate balance on the 4-hour chart.

The pivot point, represented by the green line at $149.895, serves as a gauge for intraday bullish or bearish bias. The pair has immediate resistance at $150.890, which, if broken, may open the door to further resistance at $150.814 and then at $152.496. These levels could potentially cap upward movements or, if surpassed, could signal the continuation of a bullish phase. Conversely, immediate support lies at $149.790, below which the next levels are $149.781 and $149.254. These floors are crucial to watch as they could indicate where buyers might step in to provide a bounce.

The Relative Strength Index (RSI), currently at 53.15, suggests that the pair is in a neutral zone, not overbought nor oversold. The 50-day Exponential Moving Average (EMA) at $149.895 is slightly below the current price, providing dynamic support that bolsters the pair's short-term uptrend. The proximity of the price to the 50 EMA indicates a balanced market sentiment.

In summary, the USD/JPY pair is displaying a neutral to slightly bullish trend in the short term, hovering around key technical levels that will define its immediate path. Traders looking to capitalize on this might set a buy limit at $149.781, with a take profit at $150.814, and a stop loss at $149.254 to manage risks while aiming for potential gains.