Tuesday, July 16, 2024
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USD/JPY Price Analysis: Yen rebounds amid intervention fears

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  • Investors are eagerly awaiting the US non-farm payroll report.
  • The yen is rising against the dollar for the first time in more than a month.
  • The yen has fallen 12% since the beginning of the year.

USD/JPY Price Analysis is trending lower as the yen has broken away from a 38-year low and advanced for a second session, while the dollar was volatile as investors awaited the US nonfarm payrolls report.

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For the first time in more than a month, the yen is strengthening against the dollar. But the risk of intervention remains high. The yen has fallen 12% since the start of the year. Traders have been selling yen and buying dollars due to the wide interest rate differential between the U.S. and Japan.

The Bank of Japan has begun its interest rate hike cycle, but the outlook remains bleak. Japanese consumption remains weak, and the fragile economy complicates the outlook for interest rate hikes. As a result, investors continue to sell the yen, forcing the Bank of Japan to intervene in the market twice. However, the impact was temporary, and the yen continued to fall after that.

Japan’s finance minister said Friday that Japan would closely monitor financial markets, repeating his usual warning.

Meanwhile, the dollar fell on Friday after a week of lackluster economic data. The US economy is slowing, and employment and business activity data backs that up. As a result, the market has raised the probability of a Fed rate cut in September to 73%. However, the upcoming monthly employment report could change this. If employment growth in the US is weaker than expected, it could increase expectations of a rate cut. And vice versa.

Major events for USD/JPY today

  • US Average Hourly Wages (MoM)
  • U.S. Nonfarm Payrolls
  • US Unemployment Rate

USD/JPY technical price analysis: Bears take the lead after bearish RSI divergence

USD/JPY 4-hour chart

On the technical front, the USD/JPY price has fallen below the 30-day SMA for the first time in several weeks. This breakout indicates a shift in sentiment from bullish to bearish. At the same time, the RSI has dipped below the 50 level into bearish territory, suggesting strong downward momentum.

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The bulls got tired as the price approached the key level of 162.01. In particular, the RSI showed a bearish divergence, highlighting the weakening of the bullish momentum. This allowed the bears to take control and push the price below the 30-SMA. The path for the price to return to support levels such as 160.00 and 158.00 became clear.

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