Key Points: -
- During the Asian session on Thursday, the USD/JPY pair is observed trading within a narrow range.
- The Japanese Yen (JPY) gains from renewed safe-haven demand, limiting the pair's movement due to subdued US Dollar (USD) demand.
- However, the less hawkish comments made by the Bank of Japan's (BoJ) Ueda are expected to counteract the strength of the JPY and restrict potential losses for the pair.
Today's Scenario: -
The USD/JPY pair is currently lacking a clear direction and is trading within a narrow range around the mid-139.00s during the Asian session on Thursday. The Japanese Yen (JPY) is finding support as concerns over China's economic growth, worsening US-China relations, and geopolitical tensions boost safe-haven demand for the currency. On the other hand, the US Dollar (USD) is struggling to build on its recent recovery from a multi-month low due to expectations of a less hawkish Federal Reserve (Fed), which has led to a decline in US Treasury bond yields.
The cautious sentiment surrounding the USD/JPY pair is also influenced by remarks made by the Bank of Japan (BoJ) Governor Kazuo Ueda, who emphasized that the central bank will maintain its ultra-loose monetary policy for the time being. His statements signaled that the BoJ is not considering a policy shift anytime soon. Traders are now focusing on the upcoming release of the Japanese National Core Consumer Price Index (CPI) on Friday to gauge the BoJ's future policy stance.
In the meantime, the market will closely monitor US macroeconomic data scheduled to be released during the early North American session, including Weekly Initial Jobless Claims, Philly Fed Manufacturing Index, and Existing Home Sales data. Additionally, movements in US bond yields and the overall risk sentiment will impact the USD price dynamics and provide trading opportunities for the USD/JPY pair in the short term.
Diagram of USD/JPY: -
Economic Events: -
Buy Scenario: -
USD/JPY is moving within an ascending trend channel. The recent Bull Cross between the 50-hour and 100-hour Exponential Moving Averages (EMA) suggests that the pair may have a bias towards the upside.
Immediate resistance can be found at 139.70, which was the daily high on July 20. A convincing break above this level could open the way for further gains towards 140.00, a psychological round number, and the weekly high of July 6. Another resistance level to watch is at 145.50, which was the high on July 3 and also coincides with the upper boundary of the ascending trend channel. Till we did not advise to buy in USD/JPY.
Sell Scenario: -
On the downside, a crucial support level is at 139.00, a psychological round mark and also the high of July 18. A clear break below this level might lead to a decline towards 138.70, the lower limit of the ascending trend channel. Further support can be found at 138.15, the low on July 17, followed by 137.70, the low on July 18.
The Relative Strength Index (RSI) is below 50, indicating the possibility of further downside moves for the USD/JPY pair. Till we did not advise to sell the position in USD/JPY.
Support and Resistance Level: -
S1 138.92 - R1 140.15
S2 138.23 - R2 140.69
S3 137.69 - R3 141.38