Technical Analysis

USD/JPY Price Analysis – Oct 05, 2023

By LonghornFX Technical Analysis
Oct 5, 20234 min

Daily Price Outlook

During the early European session on Thursday, the USD/JPY currency pair faced some renewed selling pressure. It dropped closer to the 148.00 mark after seeing a small increase in the previous day. This marks the second day of decline in the past three days. However, the reason for its downward trend can be attributed to several factors. Firstly, the Japanese Yen has been strengthening, exerting downward pressure on the pair. Furthermore, the US Dollar is facing some challenges as there is growing uncertainty surrounding whether the Federal Reserve will raise interest rates in the future. This uncertainty is causing the USD to retreat from its recent gains and contributing the losses in USD/JPY pair.

Multiple Factors Behind the Ongoing Decline of the USD/JPY Pair

Another factor that has been pushing the USD/JPY pair down is the growing concerns surrounding global trade tensions. The ongoing trade disputes between the United States and various trading partners, including China, have created an atmosphere of uncertainty in the financial markets. Investors tend to seek refuge in safe-haven currencies like the Japanese Yen (JPY) during times of trade-related uncertainties, which results in increased demand for the JPY and a corresponding decline in the USD/JPY pair.

Meanwhile, the decline in the USD/JPY pair is linked to a Japanese practice called "Gotobi," where certain financial transactions occur on days ending in "5" or "0." This practice can impact currency movements. There's also speculation of Japanese authorities intervening in the foreign exchange (FX) market, especially when the JPY weakened below 150.00 against the USD. As a result, some traders are adjusting their positions accordingly.

US Dollar Dynamics and Impact on USD/JPY Pair

Apart from this, the broad-based US Dollar has been losing some ground after reaching an almost 11-month high earlier this week. The reason for this decline is the disappointing US ADP jobs report released on Wednesday, along with a slowdown in the US services sector. These developments give the Federal Reserve a reason to consider holding off on raising interest rates. When the Fed is less likely to hike rates, it puts pressure on US Treasury bond yields, which in turn weakens the USD.

However, it's important to note that some Fed officials have recently suggested that they may need to tighten monetary policy more to control inflation. The market also expects at least one more rate increase by year-end. This anticipation could support higher US bond yields and the US Dollar, so it's wise to be cautious about making aggressive bearish bets on the USD/JPY pair.

Looking forward, investors may choose to wait before making big moves as they await the important US monthly employment report (NFP) coming out on Friday. Meanwhile, on Thursday, traders will pay attention to the usual Weekly Initial Jobless Claims data from the US.

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

USD/JPY - Technical Analysis

In today's daily technical outlook for USD/JPY on October 5, the currency pair is currently trading at 148.62 with a 4-hour chart timeframe. Key price levels to note include a pivot point at 149.091, immediate resistance at 149.931, and subsequent resistances at 150.545 and 151.403. On the support side, immediate levels are found at 148.46, followed by 147.619 and 147.006.

Technical indicators paint a bearish picture, with the RSI at 36.3, indicating a bearish sentiment, and the MACD line below the signal line, suggesting potential downward momentum. Furthermore, the price is currently below the 50 EMA, signaling a short-term bearish trend. Despite an observed upward channel providing support at 148.460, the overall indicators are in the sell zone, urging caution and highlighting the importance of monitoring a potential breakout below this level to consider a selling opportunity.

In conclusion, the overall trend for USD/JPY remains bearish below the pivot point of 149.091, with a short-term forecast suggesting continued resistance at specified levels in the coming days, reinforcing the bearish outlook.

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