Technical Analysis

USD/JPY Price Analysis – Nov 09, 2023

By LonghornFX Technical Analysis
Nov 9, 20234 min

Daily Price Outlook

Despite the bearish trend of the US dollar, the USD/JPY currency pair managed to stop its downward slide and slightly rose to around the 151.17 level. Looking ahead, investors are cautious about possible measures that Japanese authorities might take to prevent their currency from further depreciation, posing a challenge for the USD/JPY pair. Furthermore, the slight decline in the US Dollar, influenced by decreasing US Treasury bond yields, is exerting pressure on prices.

Market Dynamics Affecting USD/JPY Currency Pair

It's worth noting that the recent uptick in the USD/JPY currency pair has prompted speculation that Japanese authorities may intervene to influence the foreign exchange market. This, coupled with a cautious market sentiment, is offering some support to the safe-haven Japanese Yen (JPY).

On the other hand, a minor decline in the US Dollar (USD) is emerging due to diminishing US Treasury bond yields and uncertainty surrounding the Federal Reserve's (Fed) interest rate intentions, which is placing pressure on the USD/JPY pair.

Divergent Monetary Policies of BoJ and Fed Impacting USD/JPY Movement

Nonetheless, the possible downward movement for the USD/JPY pair is restricted due to the Bank of Japan's (BoJ) dovish position. BoJ Governor Kazuo Ueda recently mentioned that the central bank intends to maintain its highly accommodative monetary policy until inflation is more substantially influenced by robust domestic demand and increased wages. This stance contrasts notably with the relatively more hawkish position of the Fed.

Earlier this week, BoJ Governor Kazuo Ueda noted that the country was getting closer to achieving the 2% inflation target but hasn't made enough progress to end the ultra-loose policy just yet. Ueda also pointed out the uncertainty about whether smaller companies would be able to raise wages in the coming year.

Furthermore, on Wednesday, Ueda stressed that both wages and inflation need to rise in tandem for the BoJ to contemplate exiting the accommodative policy that has been in effect for over a decade. In contrast, recent statements from several Fed officials suggested that the central bank might not have completed its interest rate hikes.

Hence, the dovish BoJ stance and concerns about inflation and wages impact USD/JPY, limiting its downward movement as compared to the relatively hawkish Fed's rate hike expectations.

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

USD/JPY - Technical Analysis

In the currency realm, the USD/JPY pair has witnessed a slight dip of 0.04%, landing at 150.92, which seems to suggest a pause in the prevailing trend. The four-hour chart indicates that the pair is grappling with its directional bias, currently trading beneath a pivot point set at 151.1170, which is critical to determine the near-term trajectory of the dollar against the yen.

The immediate upside barrier is established at 152.8860, with additional resistances plotted at 154.0050 and 155.1970, painting a picture of the staged hurdles that bulls must surmount to take control. Conversely, support levels at 149.9620 followed by 148.1930 and 147.0380 delineate the zones where buyers have previously stepped in, suggesting these could be the areas where the pair may find a floor in the event of a downward push.

The Relative Strength Index (RSI) presents a reading of 63, which is comfortably above the mid-50 mark, signaling a bullish sentiment. This indicates that there is still some momentum left in the current uptrend, but with the RSI inching closer to the overbought territory, one must be cautious of potential reversals. The Moving Average Convergence Divergence (MACD) shows a slight convergence below the signal line, hinting at a bearish crossover that could lead to a momentum shift to the downside.

Furthermore, the currency pair is trading above the 50-day Exponential Moving Average (EMA) at 150.3380, suggesting that the short-term trend has a bullish inclination. However, this position is tenuous and a dip below this moving average could tilt the bias to bearish.

Chart patterns at this juncture would require a careful assessment to identify any recognizable formations that could provide further insights. Candlestick analysis in conjunction with these patterns can offer a more nuanced view of the market sentiment.

Concluding, the USD/JPY seems to be teetering on a neutral-to-bullish trend, given its position relative to the 50 EMA. The mixture of bullish sentiment from the RSI and the caution suggested by the MACD's positioning requires a balanced view. Traders should be prepared for potential shifts, with the pair potentially testing lower support levels if it falls below 150.33, or challenging upper resistance levels should the bullish momentum resume.

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