Technical Analysis

USD/JPY Price Analysis – June 27, 2024

By LonghornFX Technical Analysis
Jun 27, 20244 min

Daily Price Outlook

During the European trading session, the USD/JPY pair continued its downward trend, remaining under pressure around the 110.47 level and hitting an intraday low of 110.30. The decline in USD/JPY can be attributed to several factors.

Firstly, Japanese authorities, notably Finance Minister Shunichi Suzuki, have verbally intervened, expressing readiness to intervene in the foreign exchange market to address excessive movements. This statement signals Japan's concern over the yen's strength and its potential impact on export competitiveness and economic stability.

Secondly, market sentiment towards the US dollar has been cautious ahead of key economic data releases, particularly the Core PCE Price Index. However, the expectations of a slight decrease in the year-over-year inflation rate could imply a less aggressive stance from the Fed regarding interest rate hikes, thereby dampening demand for the dollar.

Japanese Finance Minister Suzuki's Statements and Impact on USD/JPY Pair

Finance Minister Suzuki's comments highlight Japan's determination to stabilize currency markets by addressing excessive fluctuations. While Suzuki did not specify intervention thresholds, his statement prompted market participants to reassess their positions, temporarily pushing USD/JPY lower.

Japan's proactive approach suggests potential interventions if the yen strengthens further, which typically pressures USD/JPY as traders anticipate government measures.

This aggressive stance underscores Japan's commitment to mitigating currency volatility and supporting export competitiveness, aiming to maintain economic stability amid fluctuating global conditions.

Hence, the Finance Minister Suzuki's proactive stance to stabilize currency markets may temporarily push USD/JPY lower as markets anticipate potential yen-strengthening interventions, reflecting Japan's commitment to curbing volatility and supporting export competitiveness.

US Dollar Weakens on Fed Rate Cut Speculation

On the US front, the broad-based US dollar lost some of its strength and turned bearish, likely due to uncertainty over the timing and number of Fed rate cuts expected this year.

The Fed's projection of only one rate cut in 2024 contrasts with market expectations, which are currently pricing in a higher likelihood of the first rate cut occurring in September, followed by two additional 25 basis point cuts by the year-end. This downward pressure on the dollar contributed to losses in the USD/JPY pair.

Federal Reserve officials, including Governor Michelle Bowman and Governor Lisa Cook, have hinted at a cautious approach towards monetary policy, suggesting that while inflation concerns persist, they may not rush into rate hikes.

This stance could limit the downside for the US dollar, particularly against the yen, which tends to strengthen during periods of risk aversion.

Therefore, the uncertain timing and number of anticipated Fed rate cuts have weakened the US dollar, influencing a decline in the USD/JPY pair. Fed officials' cautious stance on monetary policy, amid ongoing inflation concerns, may mitigate further downside pressure on the pair.

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

USD/JPY - Technical Analysis

The USD/JPY pair is currently trading at $160.571, down 0.16% in the latest session. This decline is occurring despite the broader strength seen in the U.S. dollar, reflecting mixed sentiment in the currency market.

The 4-hour chart shows a critical pivot point at $160.33, which is pivotal in determining the market's short-term direction. Immediate resistance levels are found at $160.85 and $161.21, marking potential hurdles for any bullish advance.

The Relative Strength Index (RSI) stands at 64, indicating that the market is nearing overbought territory but still has some room for further gains. The 50-day Exponential Moving Average (EMA) at $159.80 is currently providing a supportive layer, reinforcing the overall bullish trend.

Given the current technical setup, a buy order above $160.337 is recommended, with a take profit target set at $160.992 and a stop loss at $160.016. USD/JPY remains bullish above the pivot point of $160.33.

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