The Japanese yen extended its gains against the US dollar on Tuesday, as recent currency market interventions by the Bank of Japan coupled with Fed rate cut sentiments to drive USDJPY down by 0.6 percent in the intraday session. The pair is under sustained downward pressure, with its losses in the last two weeks amounting to 2.1 percent. Also, declining oil prices continue to favour the yen, and could result in further losses by the USDJPY pair.
This week is particularly definitive for the dollar, as the scheduled release of June Personal Consumption Expenditure (PCE) index figures will weigh in on the rising odds of a September interest rate cut by the Fed.
On the chart below, the 20-Period Volume Weighted Moving Average (VWMA-in black) is below the 20-Period SMA (green line), with the current rate below both of them. This signals that it is still a sellers’ market, and the downside is likely to continue.
Also, the RSI on the daily chart is currently at 36, which favours the bears to be in control. Furthermore, the current exchange rate is below the signal line on the Bollinger Bands indicator, and is about to cross below the lower band. The pair crossed below that mark on two occasions last week, but recovered to return to the upside. That makes the 156.00 mark a critical support level this week.
USDJPY will likely continue heading downwards if resistance persists at the 156.60 pivot point. In that case, the pair will likely find the first support at 155.45, but extended control by the sellers could break the support and see further losses to test 155.10.
Alternatively, if the pair moves above 156.60, it will favour the buyers to take control. The resulting momentum will likely meet the first resistance at 156.90, but if the buyers extend their control, they could push gains higher up past that mark and invalidate the downside narrative. Also, that could see the pair test the next barrier at 157.15.
This post was last modified on Jul 23, 2024, 13:24 BST 13:24