Despite weaker US data, the yen showed limited strength as traders await the Bank of Japan’s monetary policy minutes for potential insights into future interest rate hikes.
Key Points
- USD/JPY fell 0.26% on Tuesday due to a drop in US Consumer Confidence and increased Fed rate cut expectations.
- USD/JPY rose 0.68% today but is facing resistance near 144.00.
- A larger-than-expected drop in US new home sales could push USD/JPY lower.
USD/JPY Daily Price Analysis – 25/09/2024
On Tuesday, USD/JPY closed at 143.224, down by 0.26%, following a volatile session driven by disappointing US Consumer Confidence data. The index recorded one of its largest drops since 2021, highlighting deteriorating labor market conditions and increasing market expectations for a Fed rate cut in November. The probability of a 50 basis point rate cut surged to 60%, further pressuring the dollar. Investors are now questioning whether this downturn in hiring signals deeper economic issues ahead, with the upcoming NFP report on Friday expected to provide more clarity.
Despite the softer US data, the yen’s strength remains muted as traders await key signals from the Bank of Japan. The BoJ’s monetary policy minutes due on Thursday could provide more insights into the central bank’s stance, especially after the surprise rate hike in July that triggered significant market reactions
Today, USD/JPY opened at 143.217, and it has since risen to 144.208, reflecting a 0.68% gain. Early session strength in the dollar can be attributed to rising US Treasury yields, fueled by market expectations of a pause or pivot in Fed policy. However, this rally is facing resistance near the 144.00 level, where sellers are stepping in.
Key Economic Data and News to Be Released Today
Later today, new home sales data from the US will be in focus. A sharp decline is expected, with economists forecasting a 5.1% drop for August following July’s surge. A steeper-than-expected fall in new home sales could exacerbate concerns about the US economy, potentially pushing USD/JPY lower.
The US housing market is vital to consumer confidence and private consumption. Any significant weakness could fuel fears of a broader economic slowdown.
On the Japanese side, Thursday’s BoJ minutes will draw significant attention. Traders will be looking for any hints on further interest rate hikes, especially given Japan’s rising inflation. However, BoJ Governor Ueda’s recent comments downplaying immediate rate hikes have tempered expectations. The Tokyo CPI release on Friday will also be closely watched, as it could shape the BoJ’s next moves.
USD/JPY Technical Analysis – 25/09/2024
USD/JPY sudden bullish retracement today looks more like a correction than a reversal. Looking closely at price action and chart patterns being formed, it’s clear that the pair is forming a clear bearish setup.
Although price has been ranging and is even currently above the 200 EMA, USD/JPY has successfully created the second shoulder, forming a near-perfect bearish head and shoulders pattern, while also being overbought and bouncing off a resistance level.
It’s safe to conclude that there are more confluence to short the pair at the current price point. However, we may start looking to enter a long trade only if price successfully break above the resistance levels that have been marked out on the chart.
USD/JPY Fibonacci Key Price Levels 25/09/2024
Short-term traders planning to invest in USD/JPY today should keep a close eye on the following key price levels for the day:
| Support | Resistance |
| 143.075 | 144.272 |
| 142.705 | 144.642 |
| 142.107 | 145.241 |
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