On Thursday during the Asian trading session, the Japanese Yen slightly rose, causing the USD/JPY pair to fall from the weekly high reached on Wednesday. However, uncertainty regarding the Bank of Japan's policy direction continues to keep market confidence in the Yen subdued. Meanwhile, the overall global market risk appetite also limits the Yen's appeal as a safe haven, capping its gains.
Bank of Japan Policy and Market Watch
The market generally perceives the timing and pace of the Bank of Japan's interest rate hikes as unclear, which has become a significant factor limiting further strengthening of the Yen. Investor caution towards the central bank's policy direction has deprived the Yen of substantial support momentum. On the other hand, the continuous rise in U.S. Treasury yields, driven by expectations that the Federal Reserve may slow down its rate-cutting pace, continues to support the strong position of the USD. This dynamic limits the decline of the USD/JPY pair.
The market is currently focusing on the Japanese national core Consumer Price Index (CPI) data, set to be released on Friday, which might provide traders with further clues to guide the next movement of the Yen.
Technical Analysis: Key Support and Resistance Range
From the technical chart perspective, the USD/JPY pair shows some resilience below the 100-week moving average on the 4-hour chart. Meanwhile, the daily chart oscillators remain in positive territory, suggesting that any further pullback could find buying support in the 154.65-154.60 region. This area is expected to limit downside movements and provide technical support for the 154.00 level (200-week moving average). Should this level be breached, the USD/JPY pair could further decline to the weekly low of the 153.25 area.
On the other hand, immediate resistance for the USD/JPY is located at the 155.40 level, and a breach of this threshold could pave the way for a retest of the 156.00 level. Further buying interest could drive the price to test the several-month high in the 156.75 area, reached last Friday.
Market Outlook and Trading Strategy
Currently, market sentiment is cautious as investors remain wary of the Bank of Japan's policy and potential inflation dynamics triggered by the new U.S. government. Before the announcement of key technical levels and fundamental data, USD/JPY is expected to maintain a range-bound pattern between 154.00 and 156.00, with short-term traders needing to watch for any breakouts in key support and resistance areas.
