Technical Analysis

USD/JPY Price Analysis – May 09, 2024

By LonghornFX Technical Analysis
May 9, 20244 min

Daily Price Outlook

The USD/JPY currency pair has maintained its upward trend and remained well bid around 155.83, hitting the intraday high of 155.96 level. This marks the fourth consecutive day of positive performance, driven by a combination of hawkish comments from the Federal Reserve and expectations of higher interest rates in the United States.

Boston Fed President Susan Collins recently highlighted the need to keep rates higher for a longer period to combat inflation, reinforcing the USD's strength. This hawkish stance has contributed to the USD's rebound, which has been a significant factor behind the upward trend of the USD/JPY pair.

Despite this bullish momentum, the Japanese Yen (JPY) receives some support from the Bank of Japan's (BoJ) cautious approach. Japanese authorities, including Japan's top currency diplomat, Masato Kanda, have indicated their readiness to intervene to support the JPY. This creates a balancing act between the USD's strength and the JPY's potential recovery.

Modest Rebound of USD and Its Impact on USD/JPY

On the US front, the broad-based US dollar has been gaining momentum. Thanks to comments from Federal Reserve officials, such as those from Boston Fed President Susan Collins, expectations of sustained higher interest rates have been heightened, lending further support to the US dollar. However, the anticipation of continued rate hikes to manage inflation has strengthened the Greenback, positively impacting the USD/JPY pair.

Traders are keeping a close watch on upcoming economic indicators, including the University of Michigan Consumer Sentiment Index, which is expected to show a decline from 77.2 in April to 76.0 in May. However, the stronger-than-expected outcome could further boost the USD, while a weaker one might temper the bullish momentum of the USD/JPY pair.

Japanese Policymakers Call for Steady Rates to Avoid Inflation Overshoot

On the other side, the Bank of Japan (BoJ) decided to maintain its key interest rate at 0% during its April monetary policy meeting, with board members turning increasingly hawkish about avoiding an inflation overshoot. BoJ Governor Kazuo Ueda has hinted at the possibility of multiple rate rises in the coming months, suggesting a gradual shift in Japan's monetary policy approach.

Therefore, the Bank of Japan's hawkish shift, with Governor Kazuo Ueda hinting at potential rate rises, could strengthen the Yen and introduce resistance to the upward momentum in the USD/JPY pair.

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

USD/JPY - Technical Analysis

The USD/JPY pair has shown marginal gains in today's trading, with a current rate of 155.572, reflecting a slight increase of 0.02%. This subtle upward trend suggests a cautious optimism among traders as they evaluate forthcoming market signals.

Currently, the pair trades above the 50-Day Exponential Moving Average (EMA) at 155.28, which acts as a near-term support level and an indicator of bullish sentiment. The pivot point for today stands at 156.35, slightly above the highest immediate resistance at 156.31, indicating a potential for resistance consolidation around these levels. Should the USD/JPY breach this threshold, it will face further resistances at 157.03 and 157.96. These levels could serve as critical junctures for traders looking for profit-taking points.

On the downside, the currency pair has established support at 154.21, with additional lower supports at 153.33 and 151.88. These markers provide potential rebound points should the pair experience any pullbacks. The Relative Strength Index (RSI) at 60 suggests that the market is leaning towards overbought territory, which might prompt some traders to exercise caution in anticipation of a possible retracement.

Considering the current technical landscape and the position of the pair relative to its moving averages, a prudent trading strategy would be to enter a long position if USD/JPY moves above 154.950. Setting a target at 156.350 with a stop loss at 154.200 offers a tactical approach that leverages the current support and resistance framework while managing risk efficiently.

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