The USD/JPY currency pair has been experiencing sustained selling pressure for three consecutive days. On Friday, during the early hours of the European session, the pair touched a fresh low, trading around the 147.30 area, marking its lowest point since early October. The decline is attributed to a confluence of factors, including growing expectations of a Bank of Japan (BoJ) interest rate hike and escalating trade tensions.
The USD/JPY pair is poised to record significant weekly losses as market participants react to these developments. Additionally, technical indicators, such as the Relative Strength Index (RSI), are hovering close to the critical 30 mark on the daily chart. This suggests that spot prices are approaching oversold territory, intensifying concerns over the currency pair's near-term trajectory.
BoJ Rate Hike Expectations Weigh on USD/JPY
The prevailing sentiment in the financial markets points towards an impending interest rate hike by the Bank of Japan. Earlier this week, BoJ Deputy Governor Shinichi Uchida indicated that the central bank is likely to raise rates in alignment with the dominant views among financial markets and economists. This growing acceptance of a potential rate hike has underpinned the downward pressure on the USD/JPY pair.
Key technical levels are being closely monitored as bearish traders seize opportunities. The 148.70-148.65 horizontal support had been perceived as a crucial trigger, and the USD/JPY pair remains on track to break below this level. Should this occur, it could pave the way for further declines toward subsequent support regions.
As the pair hovers near the 147.00 mark, it is anticipated that this level might offer some temporary support. However, a breach below could accelerate the downward movement toward the next relevant support near 146.40. Market analysts suggest that if follow-through selling occurs, the USD/JPY could eventually descend to the 145.60-145.50 support zone and potentially even reach the psychological 145.00 mark.
Technical Indicators Signal Potential Oversold Conditions
The technical landscape for the USD/JPY pair is characterized by signals indicating potential oversold conditions. The Relative Strength Index (RSI) being close to 30 is a notable indicator, suggesting that selling pressure might be nearing exhaustion. This scenario presents a delicate balance for traders as they assess whether further declines are imminent or if a corrective bounce could materialize.
Despite the prevailing bearish sentiment, the USD/JPY pair may face stiff resistance near the 148.65-148.70 region should it attempt to recover above the 148.00 mark. This resistance level is expected to serve as a formidable barrier, challenging any efforts for a sustained recovery in the near term.
Market participants are also keeping a close watch on near-term USD price dynamics, which could provide meaningful impetus to the USD/JPY pair's movements. As global economic conditions evolve, fluctuations in USD sentiment will likely continue to play a pivotal role in shaping the currency pair's trajectory.
Near-Term Influences and Economic Data
In addition to technical and market sentiment factors, the USD/JPY pair is anticipated to be influenced by upcoming US monthly employment details. This critical economic data release has the potential to impact USD dynamics, thereby affecting the currency pair's performance.
The prevalent USD selling bias remains a key driver behind the ongoing pressure on the USD/JPY pair. As investors weigh the implications of economic indicators and central bank policies, any significant shifts in USD sentiment could contribute to further volatility in the pair's movements.
Moreover, rising trade tensions have added an additional layer of complexity to the situation. Heightened geopolitical concerns and uncertainties surrounding global trade agreements have fueled risk-off sentiment, further contributing to the USD/JPY's decline.