Daily Analysis For USD/JPY 25-05-2023

Daily Analysis For USD/JPY 25-05-2023

USD/JPY Analysis Key Points for USD/JPY pair
• Despite the overall strength of the US Dollar and robust yields, the USD/JPY currency pair is experiencing a retreat from its recently achieved six-month high.
• One factor influencing this pullback is the lack of significant progress in negotiations aimed at avoiding the expiry of the US debt ceiling. The possibility of this expiry has raised concerns among global rating agencies regarding the AAA status of the United States.
• According to Reuters, Japanese companies are expressing worries about the declining birth rate in Japan. Additionally, the release of the Federal Open Market Committee (FOMC) Minutes has revealed divisions among policymakers.
• While multiple second-tier economic data releases from the United States may provide some entertainment for traders involved in the Yen pair, it is important to note that risk catalysts hold the key to market dynamics.
Today's Scenario: - Despite experiencing a recent pullback from the Year-To-Date (YTD) high near 139.50, the USD/JPY currency pair continues to remain in a strong position as Tokyo opens for trading on Thursday. This is in line with the market's preference for risk safety, which is driving up the value of the US Dollar and Treasury bond yields. Furthermore, concerns regarding Japan's declining birth rate and its potential economic impact are weighing on the Japanese Yen (JPY) and bolstering the USD/JPY pair.
Market sentiment has deteriorated as US policymakers struggle to reach an agreement on extending the US debt ceiling, with the deadline fast approaching in early June. US House Speaker Kevin McCarthy has indicated that negotiators are being sent to the White House to finalize the debt-limit talks. However, reports suggest that US House members will return to their homes after Thursday, taking advantage of the long weekend, before resuming the negotiations on the debt ceiling. This development raises concerns that a deal may not be reached before the end of May.
Diagram of USD/JPY
USD/JPY
Economic Events and Scenario for USD/JPY
Economic Events: -
GMTEventImpactCurrency
00:01(United Kingdom) Car Production YoYLowGBP
00:50(Japan) Foreign Bond InvestmentLowJPY
00:50(Japan) Stock Investment by ForeignersLowJPY
01:00(Australia) RBA Payments System Board MeetingLowAUD
04:35(Japan) 40-Year JGB AuctionLowJPY
07:00(Germany) GDP Growth Rate QoQMediumEUR
07:00(Germany) GDP Growth Rate YoYMediumEUR
07:00(Germany) GfK Consumer ConfidenceHighEUR
07:45(France) Business ConfidenceMediumEUR
07:45(France) Business Climate IndicatorLowEUR
08:00(Spain) PPI YoYLowEUR
09:30(Slovenia) Tourist Arrivals YoYLowEUR
09:30(Slovenia) Business ConfidenceLowEUR
10:00(Euro Area) ECB Annual Report 2022LowEUR
10:00(Euro Area) ECB Guindos SpeechHighEUR
10:10(Italy) BTP Short TermLowEUR
11:00(United Kingdom) CBI Distributive TradesMediumGBP
11:00(Latvia) Unemployment RateLowEUR
12:00(Canada) CFIB Business BarometerLowCAD
13:30(Canada) Manufacturing Sales MoMLowCAD
13:30(United States) Jobless Claims 4-week AverageHighUSD
13:30(United States) Continuing Jobless ClaimsHighUSD
13:30(United States) Initial Jobless ClaimsHighUSD
13:30(United States) Chicago Fed National Activity IndexMediumUSD
13:30(United States) Real Consumer Spending QoQLowUSD
13:30(United States) GDP Sales QoQLowUSD
13:30(United States) Core PCE Prices QoQLowUSD
13:30(United States) PCE Prices QoQLowUSD
13:30(United States) GDP Price Index QoQMediumUSD
13:30(United States) Corporate Profits QoQMediumUSD
13:30(United States) GDP Growth Rate QoQMediumUSD
13:30(Canada) Average Weekly Earnings YoYLowCAD
15:00(United States) Pending Home Sales YoYMediumUSD
15:00(United States) Pending Home Sales MoMMediumUSD
15:30(United States) EIA Natural Gas Stocks ChangeLowUSD
15:30(United States) Fed Collins SpeechMediumUSD
16:00(United States) Kansas Fed Composite IndexLowUSD
16:00(United States) Kansas Fed Manufacturing IndexLowUSD
16:30(United States) 8-Week Bill AuctionLowUSD
16:30(United States) 4-Week Bill AuctionLowUSD
17:30(United Kingdom) BoE Haskel SpeechLowGBP
18:00(United States) 7-Year Note AuctionLowUSD
23:00(New Zealand) ANZ Roy Morgan Consumer ConfidenceLowNZD
Buy Scenario: - The USD/JPY currency pair is experiencing upward movement as it reaches a new yearly high around the 139.65-70 level in early Thursday trading. This advancement brings the Yen pair closer to the 50% Fibonacci retracement level of the downward move from October 2022 to January 2023, although the Relative Strength Index (RSI) indicates overbought conditions.
Aside from the 50% Fibonacci retracement level near 139.60, the late November 2022 peak around 139.90 and the key psychological level of 140.00 also pose challenges for the USD/JPY bulls.
If the USD/JPY pair manages to surpass the 140.00 level, it may target the late November swing high of approximately 142.25. However, the 61.8% Fibonacci retracement level near 142.50, known as the golden Fibonacci ratio, could present a significant obstacle for buyers. Till we did not advise to buy in USD/JPY.
Sell Scenario: - On the downside, the USD/JPY pair's retreat is unlikely unless it breaks the previous resistance line originating from December 2022, which is currently around 137.80. Subsequently, the 200-day moving average (DMA) at approximately 137.20 could challenge sellers before potentially reversing control.
In the event of a deeper pullback, a two-month-old ascending support line at 134.90 may provide support for USD/JPY bears.
Overall, the USD/JPY pair remains of interest to bullish traders, although a temporary pullback in price is expected. Till we did not advise to sell the position in USD/JPY.
Support and Resistance Level: -
SupportResistance
S1 138.64-R1 139.88
S2 137.81-R2 140.30
S3 137.39-R3 141.13

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