Technical Analysis

USD/JPY Price Analysis – Sep 07, 2023

By LonghornFX Technical Analysis
Sep 7, 20233 min

Daily Price Outlook

During the Asian trading session on Thursday, the USD/JPY currency pair continued its upward movement, reaching levels not seen since November 2022, trading within the range of 147.80 to 147.85. This uptrend is primarily attributed to the strength of the US dollar, which is currently near its highest point in six months. However, the driving factor behind this strength is the growing anticipation of further interest rate hikes by the Federal Reserve.

On the other side, there are concerns about potential currency intervention by Japanese authorities, and overall market sentiment remains cautious. This caution is leading investors to seek the safety of the Japanese yen (JPY), acting as a safe-haven currency. As a result, the substantial advances in the USD/JPY pair are somewhat limited.

Strong US Economic Data Boosts USD/JPY Pair

The broad-based US dollar is gaining traction and remained strong, reaching a six-month peak following the release of encouraging US economic data. This robust performance is notably boosting the USD/JPY pair. The US Institute for Supply Management (ISM) Services Purchasing Managers' Index (PMI) for August exceeded even the most optimistic predictions, surging to 54.5, marking the highest level since February. A deeper look into the report reveals an increase in new orders and businesses reporting higher prices, indicative of a resilient US economy and persistent inflation pressures.

These developments have boosted the prospect of the Federal Reserve (Fed) implementing an interest rate hike in November. Hence, the expectation that the Fed will maintain higher rates for an extended period is underpinning elevated US Treasury bond yields and providing further support to the US dollar and contributes to the USDJPY pair gains.

JPY Underperforms Due to BoJ's Dovish Stance and Intervention Fears

Across the ocean, the Japanese Yen (JPY) is struggling due to the Bank of Japan's (BoJ) persistent commitment to loose monetary policies, which discourages bullish positions on the USD/JPY pair. There's also concern that Japanese authorities might intervene in the forex markets to strengthen the JPY. Japan's top currency diplomat, Masato Kanda, issued a warning about the JPY's depreciation and the possibility of measures against speculative activities.

This, along with a cautious equity market sentiment, boosts the JPY's safe-haven appeal and limits USD/JPY pair gains. In the meantime, investors seems worried about rising borrowing costs and a slowdown in China, reducing appetite for riskier assets.

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

USD/JPY - Technical Analysis

The USD/JPY pair encountered a brief downtrend, touching the 147.00 barrier, before regaining momentum in an attempt to continue its anticipated bullish trajectory in both the intraday and short-term scopes.

The positive forecast remains grounded, bolstered by the EMA50 which underpins the price. It's essential to note that a breach of the 146.55 level might instigate a temporary bearish correction before the price ascends once more.

For today, the projected trading spectrum is demarcated between the support at 147.00 and the resistance at 148.40



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