Buying the Dip in USD/JPY as the 200 SMA Holds As Support
USD/JPY is showing incredible strength and pullback have been well supported, so we decided to take another long position here
USD/JPY has been experiencing robust bullish momentum since the beginning of the year, despite occasional pullbacks lower, which sometimes have been brutal. The last pullback took place last week on hopes of a tewak in the policy by the Bank of Japan. But that didn’t happen and the bullish momentum resumed again, sending the price to almost 144 yesterday, before a reversal lower.
So. one of the factors for the support in this pair has been the Japanese central bank’s decision to maintain its negative interest policy, while the other factor is the FED’s decision to continue tightening its monetary policy. The combination of the Bank of Japan’s negative interest rates and the US Federal Reserve’s policy adjustments has favored the USD/JPY pair, sending it higher and reaching the resistance level at 143.88, which is the highest it has been in nearly a month.
The USD index DXy has also been bullish, pushing the USD higher against other assets, helped by positive economic data coming from the United States, including strong Q2 GDP figures and consistently low numbers of unemployment claims. These encouraging indicators have led to increased optimism that the US economy may be able to steer clear of a recession entirely this year, and possibly even in 2024.
Some sectors of the economy are showing weakness, such as manufacturing and services, but n general the US economy is performing better than expected and better than other developed countries. So, there is some belief that there might be a need for further policy tightening by the authorities which FED’s Powell left open as a possibility for September.
We remain short on the JPY and long on USD/JPY and have been trying to buy dips in this pair. So, after the retreat early yesterday we decided to open a buy USD/JPY signal, after the 200 SMA (purple) held as support on the H4 chart above 142. The stochastic indicator was oversold, so that looked like a good opportunity to get in long again.
USD/JPY Live Chart
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