USD/JPY Price Forecast: Bears eye 146.30-146.20 support ahead of central bank events
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UPGRADE- USD/JPY drops to a one-week low on Tuesday amid a bearish fundamental backdrop.
- The divergent BoJ-Fed policy expectation and sustained USD selling weigh on the pair.
- Traders now look forward to Fed/BoJ decisions before positioning for additional losses.
The USD/JPY pair drifts lower for the second straight day and slides to a one-week low, further below the 147.00 mark during the first half of the European session on Tuesday. The selling bias surrounding the US Dollar (USD) remains unabated amid rising bets for a more aggressive policy easing by the US Federal Reserve (Fed) and turns out to be a key factor weighing on the currency pair. Investors now seem convinced that the US central bank will lower borrowing costs by at least 25-basis-point (bps) at the end of a two-day policy meeting on Wednesday and deliver two more rate cuts by the end of this year, in October and in December. This, in turn, drags the USD to its lowest level since July 7.
Meanwhile, the Japanese Yen's (JPY) relative outperformance against its American counterpart could further be attributed to the growing conviction that the Bank of Japan (BoJ) will stick to its policy normalization path. The resultant narrowing of the US-Japan rate differential turns out to be another factor driving flows towards the lower-yielding JPY. Apart from this, geopolitical risks stemming from the intensifying Russia-Ukraine war benefit the JPY's safe-haven status and contribute to the USD/JPY pair's fall. In the latest development, Russian forces launched a massive attack on Ukraine’s southeastern city of Zaporizhzhia, following a series of strikes by the latter against its oil infrastructure in recent weeks.
Furthermore, US President Donald Trump has repeatedly threatened tougher measures against Russia, raising the risk of a further escalation of the conflict. However, speculations that domestic political uncertainty could give more reasons to the BoJ to delay cutting interest rates might keep a lid on any further JPY appreciation and offer some support to the USD/JPY pair. Traders might also refrain from placing aggressive bets and opt to move to the sidelines ahead of the key central bank events. The Fed is scheduled to announce its policy decision on Wednesday, while a two-day BoJ policy meeting begins on Thursday. The outcome will play a key role in influencing the USD/JPY pair in the near term.
USD/JPY daily chart
Technical Outlook
Acceptance below the 147.00 mark might have set the stage for additional losses towards the 146.30-146.20 horizontal support. The said area represents the lower boundary of a short-term trading range extending from August 4. Some follow-through selling, leading to a subsequent slide below the 146.00 mark, will be seen as a fresh trigger for the USD/JPY bears and pave the way for deeper losses. Given that oscillators on the daily chart have again started gaining negative traction, spot prices might then accelerate the fall towards the 145.35 intermediate support en route to the 145.00 psychological mark.
On the flip side, attempted recoveries beyond the 147.15-147.20 region is likely to confront stiff resistance near the daily high, around the 147.55 region. Any further strength could be seen as a selling opportunity and runs the risk of fading near the 148.00 mark. A sustained strength beyond the latter, however, might trigger a bout of short-covering and allow the USD/JPY pair to reach the 200-day Simple Moving Average (SMA) barrier, currently pegged near the 148.75 zone. Some follow-through buying above the 149.00 mark, and the monthly high, around the 149.15 region, might shift the near-term bias in favor of bullish traders.
- USD/JPY drops to a one-week low on Tuesday amid a bearish fundamental backdrop.
- The divergent BoJ-Fed policy expectation and sustained USD selling weigh on the pair.
- Traders now look forward to Fed/BoJ decisions before positioning for additional losses.
The USD/JPY pair drifts lower for the second straight day and slides to a one-week low, further below the 147.00 mark during the first half of the European session on Tuesday. The selling bias surrounding the US Dollar (USD) remains unabated amid rising bets for a more aggressive policy easing by the US Federal Reserve (Fed) and turns out to be a key factor weighing on the currency pair. Investors now seem convinced that the US central bank will lower borrowing costs by at least 25-basis-point (bps) at the end of a two-day policy meeting on Wednesday and deliver two more rate cuts by the end of this year, in October and in December. This, in turn, drags the USD to its lowest level since July 7.
Meanwhile, the Japanese Yen's (JPY) relative outperformance against its American counterpart could further be attributed to the growing conviction that the Bank of Japan (BoJ) will stick to its policy normalization path. The resultant narrowing of the US-Japan rate differential turns out to be another factor driving flows towards the lower-yielding JPY. Apart from this, geopolitical risks stemming from the intensifying Russia-Ukraine war benefit the JPY's safe-haven status and contribute to the USD/JPY pair's fall. In the latest development, Russian forces launched a massive attack on Ukraine’s southeastern city of Zaporizhzhia, following a series of strikes by the latter against its oil infrastructure in recent weeks.
Furthermore, US President Donald Trump has repeatedly threatened tougher measures against Russia, raising the risk of a further escalation of the conflict. However, speculations that domestic political uncertainty could give more reasons to the BoJ to delay cutting interest rates might keep a lid on any further JPY appreciation and offer some support to the USD/JPY pair. Traders might also refrain from placing aggressive bets and opt to move to the sidelines ahead of the key central bank events. The Fed is scheduled to announce its policy decision on Wednesday, while a two-day BoJ policy meeting begins on Thursday. The outcome will play a key role in influencing the USD/JPY pair in the near term.
USD/JPY daily chart
Technical Outlook
Acceptance below the 147.00 mark might have set the stage for additional losses towards the 146.30-146.20 horizontal support. The said area represents the lower boundary of a short-term trading range extending from August 4. Some follow-through selling, leading to a subsequent slide below the 146.00 mark, will be seen as a fresh trigger for the USD/JPY bears and pave the way for deeper losses. Given that oscillators on the daily chart have again started gaining negative traction, spot prices might then accelerate the fall towards the 145.35 intermediate support en route to the 145.00 psychological mark.
On the flip side, attempted recoveries beyond the 147.15-147.20 region is likely to confront stiff resistance near the daily high, around the 147.55 region. Any further strength could be seen as a selling opportunity and runs the risk of fading near the 148.00 mark. A sustained strength beyond the latter, however, might trigger a bout of short-covering and allow the USD/JPY pair to reach the 200-day Simple Moving Average (SMA) barrier, currently pegged near the 148.75 zone. Some follow-through buying above the 149.00 mark, and the monthly high, around the 149.15 region, might shift the near-term bias in favor of bullish traders.
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