USD/JPY Struggles Below 149.700; Fed Hawkishness and BoJ Caution

The USD/JPY currency pair has continued its ascent, hovering around the 149.60 mark, buoyed by a bullish US dollar. This uptrend is largely attributed to the Federal Reserve’s hawkish stance and positive economic indicators from the US.

Additionally, the pair’s gains have been amplified by the Japanese Yen’s weakness, fueled by market concerns over the Bank of Japan’s (BoJ) approach to interest rate hikes. As traders await key inflation data, there’s a noticeable reluctance to take significant positions.

The US CPI is anticipated to moderate to 2.9% year-over-year from 3.4%, with the monthly rate expected to remain at 0.2%. Meanwhile, Japan’s Q4 GDP is projected to show a modest increase of 0.3%, recovering from a previous decline of 0.7%.

Impact of US Dollar Strength and Federal Reserve Policy on USD/JPY Pair

The US dollar’s trajectory remains upward, securing its position around 104.20 for the second consecutive day. Investors’ anticipation of the forthcoming US inflation data, pivotal for future interest rate decisions, has contributed to the dollar’s strength.

Federal Reserve officials have intimated a cautious approach to rate cuts in 2024, suggesting a wait-and-see policy. Consequently, the dollar index and futures have edged up in Asian trading, nearing a three-month peak, as market participants forecast potential rate hikes later in the year.

This scenario could bolster the USD/JPY pair, as the US dollar benefits from the Federal Reserve’s prudent stance on interest rate reductions, potentially offsetting the effects of lower Treasury yields.

Impact of Bank of Japan’s Monetary Policy on USD/JPY Pair

Conversely, the Japanese Yen’s depreciation reflects investor apprehension towards the BoJ’s tentative policy on interest rate increases. Remarks from BoJ Deputy Governor Shinichi Uchida underscore a cautious approach to policy tightening.

Despite this, the Yen might garner support as a safe haven amid escalating tensions between Israel and Gaza.

This development suggests that the USD/JPY pair may strengthen further as concerns linger over the BoJ’s hesitant policy on rate hikes, underscoring the nuanced dynamics influencing the currency pair.

USD/JPY Price Forecast: Technical Outlook

On February 13, the USD/JPY pair experienced a slight uptick, closing at 149.507, a 0.11% increase from the previous day. This movement situates the pair just above its pivot point 148.945, suggesting a tentative bullish sentiment among traders.

Key resistance levels are identified at 149.589, 150.259, and 150.934, which the currency must surpass to sustain its upward momentum.

Conversely, support levels are established at 148.401, 147.744, and 147.087, marking potential fallback positions should the pair retreat.

The Relative Strength Index (RSI) stands at 62, indicating a somewhat elevated buying interest without straying into overbought territory. Additionally, the 50-day Exponential Moving Average (EMA) at 148.958 provides near support, aligning closely with the pivot point and reinforcing the current trend’s strength.