USD/JPY Forecast
The decline in the US Dollar against other major currencies continues, with the USD/JPY trading below 141.20 in early European trading. This is likely due to the Federal Reserve’s dovish stance, which could affect the outlook of the US economy in 2024. The immediate resistance level for the pair is at 141.50, while the next […]
The decline in the US Dollar against other major currencies continues, with the USD/JPY trading below 141.20 in early European trading. This is likely due to the Federal Reserve’s dovish stance, which could affect the outlook of the US economy in 2024. The immediate resistance level for the pair is at 141.50, while the next barrier is at 142.00.
The market is currently testing the support near the 142 yen level and the uptrend line that’s currently in place. As a result, the 10 year US Treasury yield is going to have a significant impact on the exchange rate. If the yields start to rally, then the US dollar will benefit from the Japanese Yen’s weakness.
The first week of January will be very noisy as traders try to place long-term positions. However, before the jobs report is released, we also have other inflation numbers that could influence the markets.
The Japanese Yen fell against other major currencies on Friday after data revealed that the country’s consumer prices grew slower than expected in October. This added to the uncertainty surrounding the BoJ’s policy timetable. The minutes of the central bank’s October meeting also revealed that policymakers agreed to maintain the easy stance.
The recovery in the US Dollar supported the USD/JPY, which was able to bounce back from a fresh week low. The core consumer price index in Japan, which is the country’s main inflation measure, is expected to stay around 2% for the 20th month in a row. Also, the belief that wage growth will exceed that of 2023 suggests that the BoJ could start to shift away from its ultra dovish stance in April.
The markets are pricing in an aggressive easing by the Fed in 2024. The belief that this would happen gained strength after the third-quarter GDP print was revised lower. This has kept some traders from adding to their long USD positions. The pair is also below its 200-day SMA.
The BOJ’s policy of ultra-lax monetary policy continues to weaken the Japanese Yen. In addition, the Fed has started to move the dot plot, which suggests that there will be rate cuts. This could cause the exchange rate to consolidate. I believe that we are at a significant point in the evolution of the market, and I expect that consolidation will eventually occur.
Today’s focus is on the release of the consumer price index for the US. This data will be used by the Fed to make its next policy decisions. The data will also influence the outlook of the US economy and the foreign exchange market. Despite the positive fundamental backdrop, the outlook for the Japanese Yen remains negative.
Although the market is expected to eventually take off, it will take some time for the momentum to build up to allow us to make a move higher.
