USD/JPY analysis on July 16, 2024
After a sharp drop caused by the actions of the Bank of Japan, USD/JPY is in a weak uptrend near the 158.64 mark on Tuesday.
The market is confident that the currency intervention to support the yen was carried out by the Bank of Japan last week, but its impact was limited. This is due to the fact that the cost of borrowing in Japan remains significantly lower than that of its main competitors, and the tightening of monetary policy is proceeding at a slow pace. Investors want to wait for the balance sheet report. The latest data was released on July 12, before the start of the intervention, and new ones will be published by the end of this week. Additional pressure on the yen is exerted by macroeconomic statistics. In June, the index of business activity in the services sector fell by 0.4% after an increase of 1.9%, which confirms the weakness of the Japanese economy.
The dollar index is being adjusted around 103.90. The reaction to the speech by Fed Chairman Jerome Powell at the Economic Club of Washington was neutral, as he repeated that the transition to a "dovish" exchange rate depends on macroeconomic data. Despite the decline in the index of personal consumption expenditures in June from 2.6% to 2.5%, these data are not enough to change the course of monetary policy. The CME FedWatch Tool shows a 91.2% probability of interest rates remaining at the July 31 meeting.
On the daily chart, the pair is moving within the ascending channel 163.00–157.70, moving away from the support line.
The indicators do not give unambiguous signals. The alligator averages are approaching the signal line while the awesome oscillator indicator is forming correction bars in the buy zone.
Long positions can be opened when the price is fixed above 159.40 with a target of 161.70. We will set the stop loss at 158.70. At the same time, we do not forget about the potential for currency intervention by the Bank of Japan, which is concerned about the record low exchange rate of the yen.
We will consider entering sales when the price decreases and fixes below the support of 157.70. We will mark the target at 154.70. We will place a stop loss at 159.00.