USDJPY Technical Analysis

The USDJPY pair bounces on a key support level. What’s next?

USD

The Fed left interest rates unchanged as expected at the last meeting with a shift in the statement that indicated the end of the tightening cycle.
The US GDP beat expectations by a big margin.
The latest US CPI slightly beat expectations but analysts expect the Core PCE to print at 0.2% M/M again following the CPI data.
The labour market continues to soften but remains resilient with US Jobless Claims missing expectations this week but hovering around cycle lows.
The latest US PMIs beat expectations by a big margin for both the Manufacturing and Services measures.
The US Retail Sales beat expectations across the board.
The University of Michigan Consumer Sentiment report jumped to the highest levels since 2021.
The Fed members recently have been pushing back on the aggressive rate cuts expectations.
The market sees 50/50 chance of a rate cut in March.

JPY

The BoJ kept its monetary policy unchanged as expected with interest rates at -0.10% and the 10 year JGB yield target at 0% with 1% as a reference cap.
Governor Ueda repeated once again that they won’t hesitate to take easing measures if needed but he’s becoming more optimistic on achieving their 2% target.
The Japanese CPI eased further across all measures which makes it even harder to expect a rate hike from the BoJ anytime soon.
The latest Unemployment Rate remained unchanged near cycle lows.
The Japanese PMIs improved for both the Manufacturing and Services measures although the former remains in contractionary territory.
The latest Japanese wage data missed expectations by a big margin and as a reminder the BoJ is focusing on wage growth to decide whether to tweak its monetary policy.
The Tokyo CPI, which is seen as a leading indicator for National CPI, fell much more than expected today.
The market expects the BoJ to hike rates in Q2.

USDJPY Technical Analysis – Daily Timeframe

On the daily chart, we can see that USDJPY broke above the key resistance around the 146.60 level and extended the rally into the 149.00 handle before pulling back to retest the resistance now turned support. The buyers stepped in with a defined risk below the support to position for a rally into the cycle high at 151.90 level, while the sellers will want to see the price breaking lower to pile in and target a drop back into the lows.

USDJPY Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price recently broke below the upward trendline with the sellers increasing the bearish bets, but the pair eventually bounced on the key 146.60 support. The red 21 moving average is now acting as dynamic resistance with the sellers leaning on it to position for a breakout below the support. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the cycle high.

USDJPY Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more closely the current price action with the price testing the resistance zone around the 148.00 handle. A break above it should see the buyers increasing their bullish bets into the cycle high. The sellers, on the other hand, will want to see the price rejecting the resistance and breaking below the minor upward trendline to increase the bearish bets into the support eventually targeting a breakout.