USD/JPY SHORT-TERM TECHNICAL FORECAST – NEUTRAL
Wednesday’s failure of the Japanese yen to sustain losses against the US dollar could be a reflection of the mood prevailing since the end of 2022.
USD/JPY jumped over 2% after the Bank of Japan stuck with its ultra-easy monetary policy on Wednesday. However, the pair was unable to sustain the intraday gains following disappointing US retail sales data that cemented the view that the US economy is slowing down.
USD/JPY Weekly Chart
Importantly, the retracement of the intraday gains shows how strong the downward momentum has been in USD/JPY recently. As the weekly chart shows, the Moving Average Convergence Divergence indicator is at its lowest at least since 2018 – a sign of the extent of bearishness.
USD/JPY 240-minutes Chart
Having said that, as the previous update noted, the multi-week slide is losing steam. Put in another way, Wednesday’s jump could be a warning sign that the tide could soon be turning (up) for USD/JPY as it approaches strong support on the 89-week moving average, coinciding with the May 2022 low of 126.30. So far, USD/JPY hasn’t broken any important resistance, beginning with the 89-period moving average on the 240-minutes chart (see chart) – rallies in recent weeks have stalled at the moving average.
USD/JPY Daily Chart
Any break above the 89-period moving average on the 240-minute chart, near the upper edge of a declining channel since November, would be an indication that the three-month-long downward pressure is fading. Already, as noted last week, fresh lows in price on the Daily charts haven’t been associated with fresh lows in momentum, suggesting that the slide is losing steam.