Technical Analysis

USD/JPY Price Analysis – Jan 23, 2025

By LHFX Technical Analysis
Jan 23, 20254 min
Usdjpy

Daily Price Outlook

The USD/JPY currency pair has been experiencing a mixed performance, with recent movements showcasing a downward trend.

This shift comes as the Japanese Yen (JPY) gains some traction, recovering from a one-week low against the US Dollar (USD).

The primary reason behind this decline is the growing anticipation that the Bank of Japan (BoJ) will hike interest rates at the conclusion of its two-day policy meeting.

Market participants are also reacting to Japan’s better-than-expected Trade Balance data, which showed a surplus of ¥130.9 billion in December, reversing expectations of a deficit. Resilient export growth of 2.8% year-on-year further supports the JPY.

However, subdued local demand, reflected by lower-than-expected import growth, adds caution to the outlook. The

Meanwhile, the US dollar has faced pressure amid expectations that the Federal Reserve may lower interest rates this year due to easing inflation in the US. This was seen as another key factor behind the USD/JPY’s recent bearish movements.

Further Recovery in US Bond Yields and Its Impact on USD/JPY Pair

On the US front, the US dollar has found some support due to a modest recovery in US Treasury bond yields, which acts as a tailwind for the USD/JPY pair.

Moreover, the risk-on sentiment in the broader financial markets has contributed to the USD holding steady above its monthly lows. However, the impact of bond yields on the USD/JPY pair remains limited due to the ongoing anticipation of the BoJ’s policy decision.

Traders are also closely monitoring US labor market data, such as the Weekly Initial Jobless Claims, for further insights into the economic outlook.

While the USD remains supported by bond market dynamics, the pair’s performance continues to be influenced by Japan’s policy stance and trade data.

Growing Acceptance of BoJ Rate Hike and Its Impact on USD/JPY Pair

On the other hand, the USD/JPY pair is being influenced by expectations that the Bank of Japan (BoJ) will raise interest rates at its January 23-24 meeting, potentially from 0.25% to 0.50%. This would be the highest rate since 2008.

The BoJ aims to tackle rising prices and encourage wage increases, which are critical for Japan's economic growth.

This move contrasts with the US Federal Reserve, as markets expect the Fed to cut rates twice later this year. As a result, the Japanese yen has gained strength, pushing the USD/JPY pair lower.

However, the US dollar remains supported by high bond yields and positive market sentiment, preventing a major drop. Traders are now closely watching the BoJ’s decision and US news for further direction.

USD/JPY Price Chart - Source: Tradingview
USD/JPY Price Chart - Source: Tradingview

USD/JPY – Technical Analysis

USD/JPY is currently trading at 156.69, marking a slight increase of 0.13% as the pair stays above the pivot point at 156.39. The bullish momentum remains intact, supported by the 50-day Exponential Moving Average (EMA) at 155.89, which acts as a key support level.

Immediate resistance is seen at 157.34, with further upside targets at 158.18 and 158.88. A sustained break above these levels could drive the pair higher, reflecting continued dollar strength amid evolving market conditions.

On the downside, immediate support lies at 155.56, followed by key levels at 154.91 and 154.09. A breach below these support zones could trigger a bearish correction, with selling pressure potentially gaining traction. However, the technical outlook suggests a cautiously bullish sentiment as long as the pair holds above the pivot.

Fundamental drivers, including expectations for U.S. monetary policy and risk sentiment, remain pivotal for USD/JPY movements. Traders are keeping a close watch on upcoming economic releases and central bank statements, which could influence the pair’s trajectory in the near term.

A buy position is recommended above 156.385, targeting 157.319, with a stop loss at 155.762 to limit potential downside risks.

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USD/JPY

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