USD/JPY Will the bearish channel continue after the FOMC?

11 déc. 2023

The Japanese Yen continues to slide for the second consecutive day against the US Dollar. Investors are awaiting the US CPI and the FOMC decision this week for a fresh impetus. From a technical perspective, the USD/JPY pair showed some resilience last week at the crucial 200-day Simple Moving Average (SMA). The subsequent move beyond the 23.6% Fibonacci retracement level of the recent decline from the 152.00 neighborhood, or the year's peak, favors bullish traders. The said area should now act as a key pivotal point, which, if surpassed, should allow spot prices to test the 50% Fibo level, around the 146.80 region, and reclaim the 147.00 mark. Further selling could make the USD/JPY pair vulnerable to accelerating the descent towards the intermediate support of 144.55-144.50 en route to the 144.00 level. A convincing break below the latter will be seen as a fresh trigger for bears and pave the way for deeper losses. A report on Friday suggested that the comments from the Bank of Japan (BoJ) Governor Kazuo Ueda last week were misunderstood, and the central bank will maintain the status quo until a positive wage-inflation cycle kicks off. This adds to the weaker GDP report from Japan, indicating a still fragile domestic economy and suggesting that expectations of an imminent rate hike may be exaggerated. On the other hand, the US Dollar (USD) attracts further buying following reduced bets for an imminent policy easing by the Federal Reserve (Fed) and proves to be another factor providing rather good support to the USD/JPY pair. The monthly employment figures from the United States (US) on Friday showed that job growth accelerated in November, and the unemployment rate fell to 3.7%. This indicated signs of underlying labor market strength and suggested that the current market pricing of an interest rate cut in March 2024 was probably premature. That said, concerns about a deeper global economic downturn and geopolitical risks could limit losses for the safe-haven JPY and cap any further move up for the major. Traders might also refrain from placing aggressive bets ahead of this week's key data/event risks – the US consumer inflation figures on Tuesday and the crucial FOMC policy decision on Wednesday. Stay tuned for further updates; greetings from Nicola.