USD/JPY Struggles Amid Central Bank Event Risks
The USD/JPY pair is currently experiencing a consolidation phase after hitting a one-year low on Monday, hovering around the mid-139.00s. This comes as traders await key central bank meetings this week, with the US Federal Reserve announcing its decision on Wednesday and the Bank of Japan following suit on Friday.
Fed-BoJ Policy Divergence
- Market sentiment is influenced by the diverging policy expectations between the Fed and BoJ, acting as a headwind for USD/JPY.
- The Fed is expected to lean towards aggressive policy easing due to inflationary pressures, while the BoJ hints at potential interest rate hikes by year-end.
Market Dynamics
- Repositioning trades have supported a mild recovery of the USD from its 2024 low, providing some stability to USD/JPY.
- However, concerns about a Chinese economic slowdown and geopolitical risks have bolstered the safe-haven status of the JPY.
Economic Data and Outlook
Recent economic indicators, such as the New York Empire State Manufacturing Index, show signs of growth in business activity. However, the focus remains on the upcoming Fed/BoJ meetings for market direction.
Technical Analysis
Technically, USD/JPY faces downward pressure, with support at 139.60-139.55. A break below could lead to further decline towards 138.00.
Key Levels to Watch
- Immediate Resistance: 141.25, followed by 142.80-142.85 and 143.00.
- Immediate Support: 140.00, followed by 139.60-139.55, and 138.65-138.60.
Conclusion
USD/JPY remains under pressure amid central bank uncertainties and geopolitical risks. Traders are advised to monitor key support and resistance levels for potential trading opportunities.