USD/JPY Analysis: Assessing Near-Term Potential

USD/JPY Analysis: Assessing Near-Term Potential

At A Glance

  • USD/JPY clings near 150 despite weak USD.
  • Bearish bets against yen futures near the extreme.
  • USD/JPY remains in the ‘buy the dip’ category.
  • Technicals show bullish trends; watch for spikes.
  • Support levels: 149.72, 149.30, 148.95-149.

Despite a weaker US dollar, USD/JPY remains close to 150, lacking significant incentives for traders to prefer the yen. The absence of major catalysts, such as a hawkish Bank of Japan (BOJ) stance or risk-off sentiment, complicates the justification for a bearish outlook on USD/JPY, especially as the Federal Reserve remains quiet about rate cuts.

Yen Futures Sentiment

The latest Commitments of Traders (COT) report indicates that bearish bets against yen futures are approaching extreme levels. This could mean yen futures might stay above their 2023 lows, potentially preventing USD/JPY from exceeding its 2023 highs. Although this sentiment, drawn from weekly charts, doesn’t ensure USD/JPY won’t hit 152 before retracing, it advocates for caution. For now, USD/JPY is considered a ‘buy the dip’ opportunity, buoyed by its strong upward trajectory.

USD/JPY Technical Outlook

The daily chart shows USD/JPY’s bullish trend is still in place, with prices hovering around 150 and above the 10-day Exponential Moving Average (EMA). A recent ‘spinning top’ doji signals uncertainty at these levels. Traders should watch for abrupt movements in either direction before a clear trend is established. Despite this uncertainty, the prevailing bullish sentiment suggests opportunities for entering bullish positions near key support levels if a pullback occurs, with advancement towards 151 looking likely.

Potential Support Levels for Bullish Opportunities

  • 149.72 (10-day EMA)
  • 149.30 (volume cluster)
  • 148.95 – 149 (20-day EMA, round number)

FOMC Minutes and Yen’s Future: Potential Market Impact

The forthcoming FOMC minutes will provide insights into the US interest rate trajectory, as the Fed has effectively moderated expectations for aggressive rate cuts. Meanwhile, Japanese authorities are keeping an eye on the yen’s strength and might intervene to curb further declines despite the advantages a weaker currency brings to exports.

USD/JPY’s stance points to a possible climb towards 151, with an extension to 152 also within reach. Traders should keep an eye on key support levels for bullish setups, given the persisting bullish trend.