USD/JPY Consolidates in a downtrend Amid Rising Uncertainty
Market Overview
The US dollar has maintained relative strength against most major currencies since Friday, bolstered by increasing long-term inflation expectations. The University of Michigan’s final Consumer Sentiment survey revealed inflation expectations at their highest level in 30 years, reinforcing the view that the Federal Reserve may need to maintain restrictive monetary policy. However, the Japanese yen has gained ground as a safe-haven asset due to growing geopolitical uncertainty, particularly regarding tensions between the US and the European Union over their stance on Russia. Additionally, expectations of further rate hikes from the Bank of Japan have increased, supporting the yen and adding pressure on USD/JPY.
Technical Analysis
On the four-hour chart, USD/JPY remains in a downward trend that began on 10 February. The price action currently fluctuates within a neutral range between the resistance at 150.294 and key support at 148.839. The continuation of the bearish trend hinges on a decisive break below 148.839, which would expose further downside targets at 148.443, 147.940, and 147.384.
Momentum indicators present mixed signals. The Relative Strength Index (RSI) is declining below 50, indicating a shift in momentum towards sellers. However, MACD remains in positive territory, though its histogram bars are shortening, suggesting that recent bullish momentum is fading rather than a strong selling resurgence. Price remains below key moving averages, reinforcing the broader bearish bias.
Conversely, should buyers regain control and push the price above 150.294, it would invalidate the bearish outlook and signal a potential shift toward a bullish recovery.
Key Technical Levels
- Resistance Levels: 150.294
- Support Levels: 148.839, 148.443, 147.940, 147.384
Fundamental Drivers
Market participants will be closely watching today’s US Consumer Confidence report, which could influence USD sentiment. On Thursday, the US Jobless Claims data will provide insights into the labour market’s strength. The week will conclude with Tokyo CPI and the US PCE Price Index, both crucial for inflation expectations. Should the US PCE data surprise to the upside, it could reinforce the Fed’s hawkish stance, supporting the dollar. Conversely, a softer-than-expected report may weaken USD/JPY, increasing the likelihood of further declines.
Conclusion
USD/JPY remains in a consolidation phase, with a break below 148.839 likely to accelerate selling pressure towards lower support levels. However, a rebound above 150.294 would challenge the current bearish trend. With key US and Japanese inflation data on the horizon, traders should prepare for increased volatility in the coming sessions.
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