USD/JPY Technical Analysis: Investors Are Anxious
In the short term, and based on the hourly chart, it appears that the USD / JPY currency pair is trading inside the confines of a cohesive triangle.
The Japanese yen excelled before last weekend and has continued to gain bullish fans in recent trade. With the Federal Reserve's announcement on a possibly aggressive US interest rate this week, the currency might suffer a setback. The bulls were unable to push the USD/JPY currency pair's price above the resistance level of 131.11. Following that, trading fell below the support level of 129.02 and ended the previous week's trades steady around the level of 129.83.
Japan's yen surged in trade on Friday after inflation in Tokyo jumped more than expected in January, a result largely interpreted as portending another move in national inflation rates when they are reported at the end of February. According to Christina Clifton, Commonwealth Bank of Australia's chief economist and FX analyst, "the high rise in the consumer price index in Tokyo for January (January) adds to the case of beginning the process of unwinding the extraordinarily liberal monetary policy."
Rising inflation and persistent uncertainty over the Bank of Japan's (BoJ) monetary policy are expected to counteract the customary negative impacts of the Bank's further quantitative easing adopted to sustain the yield curve management program, according to the experts. The Bank of Japan, for its part, maintained its vow to acquire an unlimited quantity of Japanese government bonds to enforce the 0.5% upper limit put on the 10-year rate as part of the yield curve management program, and intervened regularly throughout January to that end.
While the yen increased against all of its G20 rivals on Friday, it underperformed for the week as a whole, and it is known to be susceptible to recent rises in yield on soft US government bonds, as well as this week's Fed decision, which might be an upside risk to US borrowing prices. This comes after numerous Federal Open Market Committee (FOMC) members acknowledged the apparent slowdown in the US economy in public statements during January, but also cautioned that further rate rises are anticipated in the coming months.
While the United States has had no lack of negative economic news in recent weeks, the preliminary estimate of gross domestic product for the fourth quarter was far higher than many analysts predicted, and some official measures show the labor market is resilient. This increase in the monthly rate of inflation in December is one of the reasons why the Federal Reserve Bank may raise borrowing prices over the 5% level indicated by financial markets as a likely peak in the future months.
The USD/JPY pair's technical analysis:
- In the short term, and based on the hourly chart, it appears that the USD / JPY currency pair is trading inside the confines of a cohesive triangle.
- This suggests that market sentiment lacks a distinct directional tilt.
- As a result, bearish speculators will aim for profits at 129.154 or lower at the 128.437 support.
- The bulls, on the other side, would aim to make gains around 130.571 or higher at the 131.348 barriers.
Long term, and based on daily chart performance, it appears that the USD / JPY currency pair is trading inside the confines of a falling channel. This shows that market sentiment has a considerable long-term negative tendency. As a result, bearish speculators will want to extend the current downward trend into the 126.911 support or lower to the 123.991 support. The bulls, on the other side, will try for a comeback around 132.332 or higher at the 134.835 barriers.