USD/JPY Reclaims 129.00; Risk Sentiment Improves

Posted Friday, January 20, 2023 by
Arslan Butt • 2 min read

The USD/JPY pair tends to attract buyers in the final hour of Asian trading on any given day. Typically, it will reach its peak and reverse back downward later in the day. It’s been difficult to shake the idea that we could be headed for continued losses, so this week’s activity has been very cautious. Traders should remember that these prices are confined to a small range, and a further positive move cannot be guaranteed.

Resilience in US Treasury bond yields and a shift away from USD/JPY pairs.

Last week, the benchmark 10-year government bond yield touched a 3-month low. While there is uncertainty around whether the Fed will raise rates, other factors may be emerging, causing bonds’ yields to fall further.

The markets have been pricing a greater chance of a 25 bps Fed rate hike in February. The United States released positive economic data on Thursday, which has been in high demand. The market is leaning toward the dollar, and we are still determining when this movement will stop.

Apart from this, the level of positivity in the market is good for the US dollar compared to other countries with currencies such as the Japanese yen.

Optimism is growing as China’s economy’s outlook seems to improve. There will be more growth in the coming months as they increase their prime benchmark rate, which is maintained at historically low rates. Meanwhile, the upside for the USD/JPY pair remains capped, at least for the time being. Investors are becoming more confident following fresh speculation that high inflation may invite a more hawkish stance from the Bank of Japan later this year. It is worth recalling that earlier this week; the BoJ decided to leave its monetary policy unchanged. They did so despite expectations for more hawkish signals.

Despite the fundamental backdrop, some meaningful upside is still possible for the USD/JPY pair. That said, caution is warranted until strong follow-through buying occurs. Market participants look to the US existing home sales data, which will support the USD’s recent slide.

USD/JPY Technical Outlook

The USD/JPY pair fluctuates positively to test the key resistance level of 128.90, accompanied by stochastic reaching overbought areas and the EMA50 forming negative pressure against the price, suggesting that the chances are valid to resume the main bearish trend, which targets 127.10 and 126.35 levels as the next main stations.

Therefore, the bearish bias will be suggested for today unless the market breaches 128.90 and holds with a daily close above it.
The expected trading range for today is between 127.60 support and 129.50 resistance.

The expected trend for today: Bearish

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