- Summary:
- USDJPY is recovering from a three-week decline, but key monetary policy pronouncements by the Fed and the BoJ could disrupt the flow.
USDJPY continued with its correction on Tuesday, going up by 0.4 percent in the intraday session to trade at 154.65. The pair is on course to register the first back-to back gains on the daily chart for the first time in ten days, underlining the changing the shift in the market positioning towards impending monetary policy changes in the United States and Japan. Last week, the yen registered three consecutive weekly wins against the dollar for the first time since December 2023, but the dollar has turned the tables and is up by 0.5 percent so far on the weekly chart.
JOLTs Jobs openings figures in the US and Japan’s June Industrial Production figures will be the precursor to the highlight of the day on Tuesday, which is expected to come from the Bank of Japan’s monetary policy decision. The BoJ is expected to raise interest rates by 10 basis points, and also announce a pause to its bond purchase plan. These will provide support for the yen, and could limit the upside for USDJPY, considering that the Fed is expected to retain the current lending rates in Wednesday’s meeting.
Momentum indicators
The USDJPY currency pair is currently above the middle line on the Bollinger Bands indicator, and is attempting to break above the upper band on the 4-hour chart. This signals the strengthening of the upward momentum. Meanwhile, the Relative Strength Index (RSI) indicator is above 50, which also favours control by the buyers.
Support and resistance levels
On the 30-minute chart below, the USDJPY upside looks likely to continue if the buyers keep the pair above 154.72. That could help them move higher to 155.06, where they will likely encounter the first resistance. However, extended control by the buyers at that point could break the barrier and potentially boost USDJPY to test 155.30.
On the other hand, a move below 154.72 will favour the sellers to take control. In that case, the downside will likely find the first support at 154.40. Further control by the sellers at that point will breach that mark and strengthen the downward momentum, while invalidating the upside narrative. Also, that could extend the decline to test 154.00.
