The USDJPY currency pair is poised to conclude a second consecutive week in positive territory, underlining the Greenback’s resurgence amid diminishing expectations of a near-term rate cut in the United States.
The release of US inflation data, revealing a December uptick to 3.4% from November’s 3.1%, potentially eases anticipation for a March rate cut, bolstering the Greenback. In contrast, Japan’s policy landscape diverges, with fading expectations of imminent interest rate hikes. Policymakers in Japan emphasized the need for sustained inflation and wage growth before considering such moves.
As the upcoming week unfolds, traders eagerly await Japanese inflation data, a crucial determinant for the Bank of Japan’s stance on maintaining its ultra-loose monetary policy in the short to medium term.
Technical
The USDJPY currency pair appears to have navigated a pivotal shift in trajectory, breaking free from an initial downtrend characterized by a descending channel pattern below the 100-day moving average. The breakout above this pattern suggests a potential reversal in market sentiment.
A resistance level was formed after a pronounced downturn at the 147.297 level in December. Oversold RSI levels prompted a rebound, finding support at 140.813 and propelling the pair beyond the 61.80% Fibonacci Retracement Golden Ratio.
The current scenario leaves room for optimism, as sustained upside momentum could lead to a retest of the resistance level, contingent upon increased buying volumes. Conversely, a downside scenario could see attention shift to the 50% level if selling pressures prevail.
Summary
The USDJPY is poised for a second positive week amid a resurging Greenback and receding rate cut expectations. US inflation data likely eases March rate cut pressures, diverging from Japan’s cautious stance. Technical analysis reveals a pivotal shift, breaking free from a downtrend, signalling potential for further upside momentum past the 61.80% Golden Ratio.
Sources: Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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