[ad_1]
USD/JPY OUTLOOK
- United States higher than expected inflation The figures push US Treasury yields higher, boosting the American dollar in all fields
- USD/JPY surpasses the 150.00 mark, reaching its highest level in almost three months
- This article examines the key technical thresholds to consider in upcoming trading sessions.
Most read: US Dollar Jumps on Better-Than-Expected Inflation Data, Gold Crumbles into Support
After a subdued start to the week, USD/JPY soared on Tuesday, rising more than 0.9% and surpassing the psychological level of 150.00, an explosive move that saw the pair reach its highest level in almost three months .
PERFORMANCE OF USD/JPY AND TREASURY YIELD
Source: TradingView
The US dollar’s strong performance was driven by soaring US Treasury yields following better-than-expected US inflation data. By way of context, both the general and core CPI for January surprised on the rise, with 3.9% year-on-year and 3.1% year-on-year, respectively, two tenths of a percentage point above expectations.
Are you interested in understanding where the US dollar is headed in the near term? Discover the insights in our quarterly business guide. Dont wait; Request your free copy now!
Recommended by Diego Colmán
Get your free USD forecast
US INFLATION TREND
Source: BLS
Limited progress on disinflation has led traders to reduce easing expectations for the year, as seen in the chart below. The possible start date of the FOMC rate cut cycle has also been pushed back, with market prices now pointing to the first cut occurring at the June meeting.
FED FUND FUTURES 2024 – IMPLIED RATES PER MONTH
Source: TradingView
With price pressures showing extreme rigidity, the Federal Reserve will be reluctant to begin reducing borrowing costs in the near term; in fact, it could even delay its first move until the second half of 2024 to play it safe. This could translate into higher US yields in the near term, a bullish outcome for the US dollar.
For a comprehensive analysis of the medium-term outlook for the Japanese yen, download our free first quarter trade forecast now.
Recommended by Diego Colmán
Get your free JPY forecast
USD/JPY TECHNICAL ANALYSIS
USD/JPY soared on Tuesday, breaking through the 150.00 resistance and reaching its highest level since mid-November. Although the pair remains entrenched in a solid uptrend, the exchange rate is approaching levels that could make the Japanese government uncomfortable and inclined to intervene to support the yen.
In the event of currency intervention, the USD/JPY could take a sharp turn downward, reversing part of its recent advance. In this scenario, possible support zones can be identified first at 150.00, followed by 148.90. In case of further weakness, all eyes will be on 147.40 and 146.00 thereafter.
In the absence of monetary intervention or talk from the Japanese authorities, the bulls are likely to continue pushing before launching an all-out assault on last year’s high around the 152.00 level. Additional gains from this point could draw attention towards 152.70.