The USD/JPY pair has shown resilience below the 145.00 psychological mark, bouncing back from a two-week low reached earlier today. While the Japanese Yen lost traction due to a growing trade deficit and political uncertainty, the US Dollar saw a modest rebound, putting pressure on the JPY and supporting the USD/JPY pair. Investors are now turning their attention to the upcoming FOMC minutes and Fed Chair Jerome Powell’s speech for further direction.
The Fed’s expected easing cycle, coupled with cooling inflation, may limit the USD’s recovery and cap the USD/JPY pair’s upside potential. Despite some hawkish comments from Fed officials, markets are still pricing in a rate cut in September, with expectations of further cuts in the future. On the other hand, expectations of a BoJ interest rate hike later this year could support the JPY and prevent a significant downside in the USD/JPY pair.
From a technical standpoint, the USD/JPY pair faces resistance near the 146.65 region, with key levels at 147.00 and 147.15. On the downside, support is seen near 145.45 and 145.00, with further downside potential towards 144.20 and 143.60. Traders are advised to wait for confirmation of a bottom before taking any significant positions in the USD/JPY pair.
Analysis and Breakdown:
The USD/JPY pair has rebounded from a two-week low as the US Dollar sees a short-covering rally against the Japanese Yen. The divergence in Fed and BoJ policy expectations is a key factor influencing the currency pair’s movement. While the Fed is expected to start an easing cycle, the BoJ may raise interest rates later this year. This dynamic is likely to keep the USD/JPY pair in check, with upside potential limited by the Fed’s dovish outlook and downside supported by expectations of a BoJ rate hike. Technical indicators suggest caution for bulls, with resistance levels at 146.65, 147.00, and 147.15, and support levels at 145.45, 145.00, and 144.20. Traders should await confirmation of a bottom before considering significant moves in the USD/JPY pair.
USD/JPY 1-hour chart
