USDJPY Prediction: Upside Prevails As Traders Target Key Intervention Level

Summary:
• USDJPY is likely to keep rising despite Fed rate cut sentiments as many traders believe the BoJ likely won't intervene until it hits 162.

The USDJPY currency pair rose on Wednesday as traders waited for US interest rate cues from Fed Chairman Jerome Powell. The pair traded at 161.52 at the time of writing, up by 0.1 percent in the intraday session. That was the third successive daily gain by the pair, with traders seemingly confident that the Bank of Japan (BoJ) will likely delay intervention until USDJPY exchange rate crosses the 162.00 threshold.

In his testimony before the Congressional Committee on Banking, Housing, and Urban Affairs on Tuesday, Powell stated that the US economy was no longer overheated. However, his statement was non-committal as far as interest rate cuts go, as he urged a cautionary approach to tackling inflation before initiating rate cuts. He will continue with his testimony before the House of Representatives on Wednesday, where a Q&A session could provide insights into the interest rate decision making in this half of the year.

The yen is under pressure after Japan’s Producer Price Index (PPI) fell in June, indicating the country’s struggle against disinflation is likely far from over. The June monthly PPI came in at 0.2 percent, down from May’s 0.7 percent, and missing the forecast figure of 0.4 percent. Looking beyond Powell’s testimony, traders will look for fresh volatility from the US Consumer Price Index (CPI) data set for release on Thursday. The data will provide guidance on whether US inflation is sustainably headed toward the Fed’s target of 2%, which will ultimately influence interest rate decision making.

Technical analysis

The USDJPY momentum signals control by the buyers, and the upside will likely continue if the pair stays above 161.50. That could see the first resistance encountered at 161.66, beyond which extended control by the buyers could build the momentum to test 161.87. Alternatively, a move below 161.50 could signal control by the sellers. The downside will likely find the first support at 161.32, below which the upside narrative will be invalid. Also, extended control by the sellers at that point could send USDJPY to 161.15.