The pair has started to rise, reaching 147.33. This change comes after five consecutive sessions of uninterrupted yen appreciation.
Firstly, the US dollar has stopped its rapid decline and is showing signs of strengthening. This change has caused a “pause” in the currency market rally. Second, investors have already priced in the full range of news and commentary on the Bank of Japan interest rate.
A report from Capital Economics suggests that the yen could move towards continued strengthening this year, supported by several factors.
On the one hand, unions' continued demands for higher wages indicate a stable trend toward rising prices while the economy remains relatively stable. On the other hand, the interest rate differential is expected to shift in favor of the yen shortly.
This is likely as interest rates in G-10 countries are expected to decline in the second quarter. Japan is likely to end its “ultra-loose” monetary policy in April, setting the stage for long-term strengthening of the yen.
Recent statistics reveal that Japan's GDP in the fourth quarter of 2023 grew by 0.1% quarter-on-quarter and 0.4% year-on-year, significantly exceeding forecasts and surpassing the figures for the third quarter of 2023. In particular, the expenditure component capital for the fourth quarter experienced a quarter-on-quarter increase of 2.0%, contrary to the expected decrease of 0.1%.
USD/JPY technical analysis
On the H4 chart, USD/JPY has formed a consolidation range above the 146.49 level. The market has broken up from this range, suggesting a wave of growth towards 149.60 as the first target. After reaching this target, a correction to 148.00 is possible. The MACD oscillator supports this scenario with its upward trending signal line.
On the H1 chart, USD/JPY has broken through the 147.26 level, opening the potential for a wave of growth to 148.00 as the first target. A correction wave may follow to 147.27 (testing from above) before rising to 148.78 as a local target. The stochastic oscillator confirms this scenario with its signal line currently above 80 and preparing to fall to 50.
By RoboForex Analysis Department
Disclaimer
Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
