- USD/JPY attracts follow-through buyers on Wednesday amid a combination of supporting factors.
- Japan’s fiscal woes and a cautious BoJ undermine the JPY, supporting spot prices amid bullish USD.
- The technical setup warrants caution for bullish traders as the focus remains on the FOMC Minutes.
The USD/JPY pair touches a one-and-a-half-week high, around mid-158.00s during the Asian session on Wednesday, with bulls shrugging off fears about a potential government intervention to support the Japanese Yen (JPY) and taking cues from resurgent US Dollar (USD) demand.
Despite signs of moderating inflation and a cooling labor market, traders are still pricing in around an 85% chance that the US Federal Reserve (Fed) will raise interest rates by the end of this year. Furthermore, a fresh leg up in US bond yields and persistent geopolitical uncertainties help revive demand for the safe-haven Greenback.
Adding to this, concerns about expansionary fiscal policies under Japan’s Prime Minister Sanae Takaichi and a cautious Bank of Japan (BoJ) weigh on the JPY, backing the case for a further appreciating move for the USD/JPY pair. Bulls, however, might opt to wait for the release of the FOMC meeting Minutes before placing fresh bets.
From a technical perspective, the USD/JPY pair keeps a capped near-term tone below the 100-day Simple Moving Average (SMA) at 159.53 and the 50.0% retracement at 158.52. Meanwhile, the Moving Average Convergence Divergence (MACD) holds slightly above zero, and the Relative Strength Index (RSI) at 56.53 leans to the bullish side.
Momentum indicators, however, suggest that rallies are vulnerable to selling pressure rather than a clean trend resumption higher. Hence, any subsequent move up might confront immediate resistance at the 50.0% retracement at 158.52. This is followed by the 100-day SMA at 159.53, ahead of the 61.8% Fibo. retracement at 159.82.
Further up, barriers at 161.68 and 164.04 reinforce a broader supply zone. On the downside, initial support is seen at the 38.2% Fibo. retracement at 157.22, ahead of the 23.6% level at 155.61, while the structural low near 153.00 marks a deeper floor if bearish pressure intensifies.
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