USD/JPY: Sellers Confront Key Support Level Ahead of PCE Report

Market Overview

On Wednesday, 27th November 2024, Asian currencies mostly remained steady, with the Japanese yen strengthening against the U.S. dollar. Market participants appeared concerned about the potential implications of the new tariffs being implemented under the leadership of Donald Trump. The U.S. dollar retraced slightly, as attention shifted towards significant economic data from the world’s largest economy, in search of further insights regarding future interest rate moves.

Technical Analysis

In the 4-hour chart for USD/JPY, the pair is currently undergoing a corrective move from its recent uptrend, having broken below the last key support at 153.273. The price is now testing the 161.8% Fibonacci support level at 151.662, which holds significant weight as a potential pivot point for the next move. The Relative Strength Index (RSI) has dropped into oversold territory, at around 26.99, suggesting that the pair could find temporary support at this level, with a possibility of a pause or consolidation in the downtrend.

Until sellers muster enough momentum to breach the current support, the price is likely to oscillate between the 153.273 resistance level and the 161.8% Fibonacci level at 151.662. This points to a potential sideways movement until a stronger selling impulse emerges.

The downward crossover of the 34-period moving average over the 100-period moving average further supports the bearish outlook, indicating growing seller strength and continued downward pressure. Should the current support at 151.662 fail, the next downside targets will be the 200% Fibonacci level at 150.667, followed by the 241.40% level at 149.588.

Alternative Scenario

If the price manages to rebound and break above the Fibonacci resistance levels at 61.8% (154.268) and subsequently the 0% level (155.879), this could challenge the ongoing downtrend and potentially trigger a reversal towards an uptrend.

Key Levels

• Resistance Levels:
  • 155.879 (0% Fibonacci Level)
  • 154.268 (61.8% Fibonacci Level)
  • 153.271 (Previous Support, Now Resistance)
• Support Levels:
  • 151.662 (161.8% Fibonacci Level, Key Immediate Support)
  • 150.667 (200% Fibonacci Level)
  • 149.588 (241.40% Fibonacci Level)

Key Events to Watch

On Wednesday, the United States will release the Personal Consumption Expenditure (PCE) Price Index, the Federal Reserve’s preferred inflation gauge. Uncertainty remains over whether the U.S. central bank will proceed with a further 25 basis point rate cut in December, particularly given recent data showing persistent inflationary pressures. The upcoming PCE report will be the final inflation data ahead of the December meeting. Economists expect the PCE index for October to rise to 2.3% year-on-year, up from 2.1% in the previous month. Additionally, the Federal Reserve’s November meeting minutes, released on Tuesday, revealed that members are still favouring a gradual approach to easing monetary policy.

Conclusion

The USD/JPY pair faces strong selling pressure as it tests a critical support level at 151.662. A sustained move below this level could pave the way for further declines, while a recovery above key resistances could signal a shift back to bullish momentum.