The Japanese yen (JPY) has been at its lowest point since the beginning of August, failing to make significant gains against its U.S. counterpart. However, the technical chart shows a decent bullish continuation, creating a potential continuation opportunity.
Why Is USDJPY Moving Higher?
The Bank of Japan's (BoJ) plans to raise interest rates were questioned after Japanese Prime Minister Shigeru Ishiba stated a few weeks ago that the economy was unprepared for additional rate hikes. This still weakens the need for the safe-haven Japanese yen and the generally positive mood surrounding the equity marketplaces.
Following Japanese Prime Minister Shigeru Ishiba's dovish shift at the start of October, the futures market indicates a probability lower than 50% chance that the Bank of Japan will raise interest rates by ten basis points before the year ends.
Furthermore, there were concerns about how aggressively the BoJ might increase rates given a decline in household spending, a drop in actual salaries in Japan for the first time in the past three months, and indications that price difficulties from the cost of raw materials were abating.
Bulls Are Active On US Dollar Index (USDX)
The US dollar (USD) continues to hold steady close to a two-month high as the public's acceptance of the Fed's (Fed) softer policy easing grows. This is another factor driving the USDJPY pair higher. In November, the Fed is still anticipated to reduce borrowing expenses by 25 basis points. T
The BoJ, on the other hand, is more inclined to adhere to its cycle of rate increases. With comparatively low trading volumes following a partial break in the US, this could limit the currency pair's upside.
According to the US Bureau of Labor Statistics, the core measure increased by 2.8% annually, and the overall Producer Price Index (PPI) for the final demand increased by 1.8% annually in September, both of which were marginally higher than market expectations.
Can China's Economy Affect The USDJPY Price?
China's finance ministry stated that the nation's government has ample room for an expenditure increase and alluded to further debt issuance to support the country's economy. Still, it did not elaborate on the stimulus.
However, investors appear hopeful that broad measures will be implemented to stabilize important economic sectors. They also took inspiration from the recent surge in US equity indexes, which reached all-time highs on Friday.
USDJPY Forecast Technical Analysis
In the daily chart of USDJPY, the broader market momentum is bullish, supported by a valid bottom formation from the December 2023 low.
As a result of the bullish continuation, the price aimed above the high volume line of 147.51 level. Also, the 50 day Exponential Moving Average is breached with multiple daily candles above this.
Based on the daily outlook of USDJPY, a strong bullish continuation is potent, where the 200-day Simple Moving Average will be a barrier to look at. Primarily, the upward pressure might extend and test the 151.00 psychological line. But a stable market above the 200 day SMA line might open the room for reaching the 156.00 area.
The alternative approach in this pair is to wait for a buy side liquidity sweep from the 149.42 high with an immediate bearish reversal below the 145.91 level. In that case, a bearish opportunity would open, aiming for the 142.00 level.
