The USDJPY pair is approaching critical resistance, demonstrating resilience in the face of the ambiguity accompanying a week-long data dump.
In anticipation of the Federal Reserve (Fed) contemplating a reduction in interest rates later this year, the US Dollar Index (DXY) is hovering near 103.70. The yield on 10-year US Treasury notes has decreased to 4.25%.
Investors Await For Core PCE Data
The US core Personal Consumption Expenditure price index (PCE) data for January, which is scheduled for release on Thursday, has captured the interest of investors this week. Regarding prospective Fed rate cuts, market expectations will be impacted by this information.
As per the findings of the CME FedWatch tool, investors expect that the Federal Reserve will sustain interest rates between 5.25% and 5.50% throughout its policy meetings in March and May. A rate reduction of 25 basis points (bps) is projected for June.
In the interim, policymakers at the Federal Reserve underscored the significance of maintaining interest rates unchanged until substantiated evidence arose that inflation corresponds to the target of 2%.
Japan's CPI Lowered At 2.0%
Investors saw the January National Consumer Price Index (CPI) data at the 2.0% level, down from the 2.30% in the previous quarter. More data is needed to see the current expectation from BoJ to see the inflation level below the 2.0% target to abandon its expansionary monetary policy stance.
USDJPY Technical Analysis
In the daily chart of USDJPY price, the ongoing bullish trend is valid as the recent price trades with a higher high formation above the visible range high volume level.
The 100-day Simple Moving Average is below the 145.91 static support, suggesting long-term support, while the 20-day EMA formed a bullish crossover at the 147.77 high volume level.
After forming a top at the 151.89 level, significant selling pressure came from November 2023, but bears failed to hold the trend reversal. As a result, an immediate reversal had come, which almost eliminated all losses.
In that case, a bullish breakout above the 151.88 level is possible as long as the price trades above the 149.52 support level. The bullish target for this pair would be the 153.00 level before reaching the 156.00 line.
On the bearish side, a downside correction is possible towards the 149.00 level but breaking below the 20 day EMA could extend the bearish momentum towards the 145.91 support level.
