USD/JPY at 147.70: BoJ Policy & U.S. GDP Data Set Tone

Heading into Thursday’s trading, USD/JPY finds itself navigating near the 147.70 level, retreating from the 148.00 territory. The currency pair has been entangled in a declining pattern since reaching a zenith close to 148.50 in the previous week.

Bank of Japan’s Persistent Dovish Outlook

The Bank of Japan (BoJ) has reasserted its dovish monetary policy stance, signalling a continued commitment to negative interest rates. The central bank’s decision hinges on sustained inflation metrics within Japan, maintaining a target that avoids falling significantly below the 2% mark.

Wage Developments in Japan’s Economic Landscape

Anticipation is also building around wage trends in Japan, with the customary season for salary reviews upon us. These negotiations, typically unfolding in the year’s first half, will provide insights into the domestic economic milieu and potentially influence the BoJ’s policy direction.

Upcoming U.S. GDP and PCE Data in Focus

Stateside, economic indicators have delivered a positive surprise, with the S&P Global Manufacturing PMI reaching an 11-month peak at 50.3, exceeding the anticipated 47.9. The Services PMI likewise recorded an uptick to 52.9, surmounting projections of a downturn to 51.0.

Market attention now shifts towards the impending U.S. GDP update for the fourth quarter, with predictions suggesting a deceleration to 2% from the previous 4.9%. The week’s conclusion will bring further scrutiny to new Personal Consumption Expenditure (PCE) Price Index data.

Forecasts indicate a minor increase in the month-over-month PCE to 0.2%, while the yearly inflation figure is expected to diminish slightly from 3.2% to 3.0%. Given the PCE’s status as the Fed’s preferred inflation gauge, the December figures will be pivotal for investors gauging the potential for an accelerated rate cut timeline.

USD/JPY Technical Forecast

The USD/JPY currency pair is currently at a pivotal stage, trading just above the 50% Fibonacci retracement level at 146.578. This technical juncture has proved to be a stronghold for the pair, with recent price action forming a trio of bullish candles.

This development is underpinned by an ascending trendline, suggesting a strong case for a bullish reversal in the near term. The pair’s pivot point at 147.268 is now a critical anchor for market sentiment, with price levels above this acting as resistance points and those below as supports.

The immediate resistances are identified at 147.752 and 148.802, with the latter marking a previous double-top formation—a technical pattern that traders often associate with potential bullish breakouts.

A successful push through this resistance could see the USD/JPY challenging the higher resistance at 149.589. On the downside, supports lie at 147.103 and 146.578, with the latter doubling as the 50% Fibonacci retracement level that has recently acted as a springboard for the bullish candles.

The Relative Strength Index, settled in the mid-50s, lends further support to the possibility of an uptrend without the immediate threat of an overbought scenario. The backdrop of a robust U.S. dollar, fueled by consistently strong economic data, has been a tailwind for the pair.

With the market pricing in this strength, the USD/JPY appears to have room to manoeuvre upwards, potentially setting sights on the next key resistance at 148.800. A breach here could signal a continuation of the upward trajectory, with 149.589 and potentially 150.259 as subsequent targets.

Investors and traders will be closely watching these levels as the pair continues to respond to the interplay of market dynamics and economic indicators.

USD/JPY Live Chart

ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

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