Post “intervention” gains by the JPY from Monday are being lost as the interest rate differential continues to weigh heavily on the JPY. The big question on investors’ minds will be whether or not to buy this dip ahead of the FOMC press conference in anticipation of continuous Fed hawkishness.
Key Points
- After the BoJ’s suspected intervention to keep the JPY from sliding against the dollar, a huge percentage of the Yen’s gains have been lost.
- Focus now shifts to the big FOMC press conference.
- The price remains below the 158 key level, just above the 157.689 FIb retracement support.
USD/JPY Daily Price Analysis – 01/05/2024
It looks like the threatened intervention from the BoJ finally came when the pair rose beyond 160 on Monday and sharply fell by 1.25% to close that day at 156.360. While the BoJ didn’t confirm or deny any involvement, the central bank remains the most likely suspect. It had already promised to intervene, with the BoJ governor coming up at one time to say they were willing to do whatever was necessary to support the Yen.
Tuesday, however, was a resumption of the order of the day before the suspected intervention. The Yen lost 0.93% to the USD, lifting the price to 157.814. The BoJ keeps trying to fight for its currency by incentivizing companies to convert their profit to Yen and drive up the demand for the Yen. However, the interest rate differential may weigh heavily on the JPY.
Japan raised its interest rate from the negative zone to a range between 0 and 0.1% for the first time in a long time. However, the United States has had its rates high for so long that it just makes more sense for investors to keep the higher-yielding USD instead of the safe-haven JPY. Even though the Fed is going to make its interest rate decision public today, according to the CME FedWatch tool, there’s almost no chance of a rate cut.
From the technical perspective, the pair has a bullish outlook, judging by the 50EMA and the RSI.
USD/JPY Intraday Technical Analysis – 01/05/2024
The pair looks to be on its way back up after dipping to as far as 154.528. This low almost coincides with the 0.786 (155.009) level of the Fibonacci retracement tool level, with last Friday’s low as the swing low and Monday’s Asian Session high as the swing high. Since then, the price has risen past the 0.618 (156.124) and 0.5 (156.907) Fib levels. It now sits just above the 0.382 (157.689) Fib level and the 158 key psychological level. All it needs to hit its decades-long all-time high of 160.223 is first to clear the 0.236 (158.658) Fibonacci retracement level.
Key Economic Data and News to Be Released Today
We have the FOMC press conference and interest rate decision ahead of us on Wednesday. Although the expectation is that the interest rate remains the same, investors will still keep an eye out for hawkish or dovish tones from the officials. A hawkish tone may increase bets on further delay in rate cuts, keeping the USD attractive to carry traders and interest rate differential hunters.
USD/JPY Key Fibonacci Price Levels 01/05/2024
Based on the 1hr chart, the key Fibonacci price levels for USDJPY are these:
| Support | Resistance |
| 157.689 | 158.658 |
| 156.907 | 160.223 |
| 156.124 |
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