USD/JPY Eyes 159.45 as 158.70 Holds Ahead of BoJ and US GDP
USD/JPY continued to extend its upward bias in the European session, sitting just above 158.60 and hovering near 158.70...
Quick overview
- USD/JPY is showing an upward trend, currently hovering around 158.70, supported by strong US data and a favorable policy outlook.
- The Japanese yen remains under pressure due to uncertainty surrounding the Bank of Japan's upcoming policy meeting and political developments.
- US economic indicators suggest that interest rates will remain elevated, making the dollar more attractive against the yen.
- Technically, USD/JPY is consolidating within a rising channel, with key support at 158.30 and resistance at 158.90.
USD/JPY continued to extend its upward bias in the European session, sitting just above 158.60 and hovering near 158.70. It shows that the market is still very much skewed in favour of the US dollar, now that risk sentiment has levelled out again and policy divergence is firmly on everyone’s minds.
The transatlantic relations, taking a slightly softer tone, have, in fact, helped ease some of that broader macro uncertainty, allowing traders to refocus on what’s really going on – namely the relative growth and yield dynamics. With US data still coming in quite strong and rate expectations remaining largely unchanged, the dollar keeps finding buyers on dips.
For USD/JPY, that means downside pressure is going to continue to be limited for now – at least, even though price has paused just about at a familiar level of resistance.
BoJ Uncertainty Keeps the Yen on Its Knees
The Japanese yen is still being squeezed by the Bank of Japan’s upcoming policy meeting. Although most expect Bank of Japan to stick with the current rate of 0.75%, which is the highest level seen in three decades, its not the actual decision that’s got markets on edge – its the guidance that comes out alongside it.
The uncertainty with Japanese politics is adding another layer of complexity. With Prime Minister Sanae Takaichi calling a snap election in February, investors are getting worried about any kind of fiscal discipline – and the fact that she wants to go for expansionary spending and low taxes is only making things worse. That’s just keeping investors cautious on the yen, especially if the Bank of Japan governor avoids giving a clear roadmap for future tightening.
Until the Bank of Japan signals a firmer shift towards normalisation, the yen is just going to keep being at the mercy of the markets rather than making any real moves of its own.
US Data and Policy Outlook Favours the Dollar
US data, on the other hand, is turning people’s attention to those final Q3 GDP figures and the PCE inflation index. Growth is looking to stay pretty solid, and PCE inflation is still forecast to be above the Federal Reserves 2% target.
That mix just supports the idea that US interest rates are going to stay a lot higher for a lot longer, even though markets are still pricing in a little easing later in the year. For USD/JPY, that just means one thing: yield differentials are still making it more attractive, and any pullbacks in the dollar are just going to make it more interesting to buy back in.
USD/YEN Technical View: Trend is Still Intact – Resistance in Sight
From a purely technical perspective, USD/JPY is really just consolidating rather than rolling over. On the 2-hour chart, the price is still trading within a rising channel that has been guiding it since late December. The recent candles are showing some small real bodies with pretty limited wicks – and that’s a good sign that things are really just pretty balanced at the moment.
Levels to keep an eye on are
- Support looks set to hold at 158.30, with the 157.65 trendline area not far behind.
- The 50-day EMA is hovering near 158.10, with the 200-day EMA rising around 157.65
- Resistance is kicking in around 158.90, and then you’ve got the recent swing high at 159.45
- The RSI is around 60, which is a sign that momentum is improving without getting too carried away.
So it’s all pointing to consolidation within the trend – rather than any kind of exhaustion.
Trade idea: Buy dips near 158.30, look to target 159.40 before stopping outs below 157.65.
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