- For two consecutive weeks, the USD/JPY pair has been moving within a prominent upward channel on the daily chart, culminating in a move towards the resistance level of 153.80, the pair's highest level in more than two weeks.
- Obviously, this is before closing the week's trading stable around the 153.60 level.
- Moreover, this performance will be on an important date with the last global central bank announcements this year and before the Christmas holidays.
- Therefore, strong fluctuations in the performance of the currency pair are expected this week.
The US Federal Reserve May Cut Interest Rates
This week, Federal Reserve officials will conclude a two-day meeting and issue an update on US interest rate policy. At their meeting last month, Fed officials cut the US interest rate by a quarter point. This came after a larger half-point cut in the September meeting. The biggest expectation is that the US Federal Reserve will announce another interest rate cut, although some Fed officials have recently indicated that they have not yet made a final decision on whether they will support a rate cut this month.
Trading Tips:
I still recommend buying the US dollar against the Japanese yen from every downward level, but without risk, while monitoring the strong factors influencing the trend this week
Reasons for Selling Pressure on the Japanese Yen
Since the beginning of this month, the Japanese yen has been under selling pressure against other major currencies. Clearly, the most prominent was against the US dollar. According to reliable trading company platforms, the Japanese yen has recorded its longest losing streak against the US dollar since last June, as traders bet that the Bank of Japan will refrain from raising interest rates.
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On the policy front, Bloomberg recently reported that Bank of Japan policymakers see little cost in waiting until January 2025 or later to raise interest rates because there is a limited risk that inflation will exceed the cap. Also, the report added that they are open to raising interest rates depending on economic data and market developments. Overall, financial markets have reduced their bets on a rate hike by the Bank of Japan this month after the report, now setting a 16% probability for this outcome. A week ago, the chance of a Japanese rate hike was 64%. The Bank of Japan's decision comes a day after the US Federal Reserve cut interest rates by a quarter of a percentage point, although the longer-term outlook is gloomier.
Affected by the bank's decisions, the Bank of Japan's quarterly Tankan survey released on Friday showed that confidence among major Japanese companies remains optimistic, but the data did not move interest rate expectations. Also, hedge funds have recently increased their bets against the yen, according to Commodity Futures Trading Commission data for the week ended December 10.
USD/JPY Technical Analysis and Expectations Today:
Based on recent performance, the USD/JPY has now risen to trade slightly above its 100-hour moving average. As a result, the currency pair is about to enter the overbought levels of the 14-hour RSI. Therefore, bulls will look to extend the current rally towards 154.71 or higher to the resistance of 155.61. On the other hand, bears will seek to benefit from a correction downwards around 152.68 or lower at the support of 151.80. In the long term, according to the performance on the daily chart, the USD/JPY currency pair has completed an upward breakout from a descending channel formation. Also, the 14-day RSI has bounced back to approach the overbought levels. Therefore, bulls will seek to continue moving within an upward channel towards the resistance levels of 157.65 or higher to the resistance of 161.75. As for the MACD indicator, it is trying to move away from the oversold levels. On the other hand, bears may benefit from selling to take profits from moving towards the support levels around 149.60 or lower at the support of 145.00.
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