USD/JPY Technical Analysis: Central Bank Policies Determine

Last Thursday, US initial jobless claims for the week ending July 14 exceeded the expected claims count of 245,000 with a count of 228,000, while continuing claims for the prior period topped 1.729 million with a claims count of 1.754 million.

Last week’s trading was generally bullish for the performance of the USD/JPY currency pair, with bullish retracement gains that reached the 141.95 resistance level, and Friday’s trading session was the most prominent in the upward retracement path. It settles around 141.45 at the time of writing. The currency pair may remain in the current upward rebound path until the markets react to the announcement of the monetary policy decisions of both the US Federal Reserve and the Central Bank of Japan this week. Expectations are still in favor of the strength of the US dollar, as the Japanese central bank is still the owner of the negative interest rate so far, and alone from the rest of the global central banks, which take a hard stance with more rate hikes to contain the historical record inflation.

According to the fundamental analysis, the USD/JPY currency pair is trading affected by the results of the recent economic data, as the Japanese National Consumer Price Index for June missed the expected change (yearly) by 3.5% with a change of 3.3%. On the other hand, the CPI for ex-food and energy and the CPI for fresh food both matched expected changes (y-o-y) at 4.2% and 3.3%, respectively. Earlier in the same week, Japanese Imports and Exports for June missed expectations at -11.3% and 2.2% respectively with changes of -12.9% and 1.5%.

In the US, Retail Sales for June missed the expected change (MoM) by 0.5% with a change of -0.2%. Retail Auto Sales fell 0.3% with a change of 0.2%, while the Retail Sales Watch group beat the expected change of -0.3% with a change of 0.6%. Last Thursday, US initial jobless claims for the week ending July 14 exceeded the expected claims count of 245,000 with a count of 228,000, while continuing claims for the prior period topped 1.729 million with a claims count of 1.754 million.

• The price of the USD/JPY currency pair has now advanced to trade a few levels above the 100-hour moving average line. Last Friday’s rally pushed the currency pair to the overbought levels of the 14-hour RSI.
• In the near term, and according to the performance on the hourly chart, it appears that the USD/JPY currency pair is trading within a bullish channel formation.
• This indicates a significant short-term bullish bias in market sentiment. Therefore, the bulls will target extended gains at around 142.40 or higher at the 142.98 resistance. On the other hand, the bears will target short-term pullbacks around 141.24 or below at 140.62 support.

In the long run, and according to the performance on the daily chart, it appears that the USD/JPY is about to return to forming an ascending channel after the recent bounce. This indicates that the bulls are trying to regain control of the pair in the long run. Therefore, the bulls will target extended bounces around 144.83 or higher at the 148.25 resistance. On the other hand, the bears will target long-term profits at around support 138.33 or lower at 134.71 support.

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