The USD/JPY currency pair is navigating a complex landscape, marked by a positive reversal in Relative Strength Index (RSI) and stochastic oscillator indicators, which signal an improving buying appetite. However, the 20- and 50-day Exponential Moving Averages (EMAs) in a bearish cross cast doubts over the sustainability of the market's uptrend. The price needs to close above 153.35 to confirm the uptrend, while a break above 154.30 would eliminate downside risks.
On the economic front, global stock markets displayed resilience by brushing off tariff fears on Monday. Despite the imposition of 25% levies on steel and aluminum imports late Monday night, major indices like the S&P 500 and Eurostoxx 50 are anticipated to open lower today. This indicates caution among investors as they digest the potential implications of these tariffs.
The technical landscape for USD/JPY is intricate. The price must breach the resistance level at 154.30 to sustain its rally. This level aligns with the 23.6% Fibonacci retracement of the September-January uptrend, marking a significant hurdle. Additionally, both the upper band of the short-term bearish channel and the 20- and 50-day EMAs are positioned at this critical level, further emphasizing its importance.
In terms of economic indicators, the core Consumer Price Index (CPI) is predicted to remain above the Federal Reserve's target, standing at 3.1% compared to a year ago. This could influence market sentiment as traders anticipate the upcoming US CPI data release. The US Dollar remains firm amid market nervousness, contributing to a modest uptick that has attracted some sellers in the gold market.
The broader economic outlook also includes expectations for the Consumer Price Index to show an annual increase of 2.9% in January. Such data points will be crucial for market participants in assessing inflationary pressures and their potential impact on monetary policy decisions.