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Moving Average Confluence Ignites Potential for New Rally
Central Bank
Economic
Summary:
This classic reversal formation, aligning with the broader prevailing trend, suggests that a renewed bullish extension from this support zone is highly probable.
Buy
CLOSEDUSDJPY
End Time
156.310
Entry Price
157.700
TP
155.300
SL
156.658 +0.239 +0.15%
615
Points
Profit
155.300
SL
156.925
CLOSING
156.310
Entry Price
157.700
TP
The Japanese Yen experienced widespread strengthening following the release of the Bank of Japan’s (BoJ) latest monetary policy minutes. The documents revealed a consensus among members that interest rates remain significantly below neutral levels. However, several officials emphasized the necessity of a cautious approach to avoid destabilizing the domestic economy or broader financial markets.
In December, the BoJ successfully hiked its benchmark rate by 25 basis points (bps) to 0.75%, marking a three-decade high. The bank further hinted at additional adjustments throughout 2026 as it continues its normalization process. Despite this hawkish pivot, investor concerns persist regarding Prime Minister Sanae Takaichi’s pro-stimulus stance. Market participants fear such policies could exacerbate an already strained fiscal deficit, as the looming risk of a debt crisis remains a significant headwind for any sustained Yen recovery.
The U.S. Bureau of Economic Analysis reported that the domestic economy expanded at a robust annualized rate of 4.3% in the third quarter. This figure significantly outperformed market expectations of 3.3% and surpassed the previous estimate of 3.8%. Accompanying this strong growth, inflation metrics within the Gross Domestic Product (GDP) report remained firm: the GDP Price Index rose by 3.7%, while Personal Consumption Expenditures (PCE) increased by 2.9%, with core PCE prices climbing 2.8%.
Despite this vigorous growth, the manufacturing sector exhibited signs of cooling. Durable Goods Orders fell by 2.2% in October, reversing a prior gain of 0.7%. Excluding defense, orders dropped by 1.5%, and while orders excluding transportation saw a marginal 0.2% increase, overall Industrial Production slipped by 0.1% month-over-month. In contrast, the housing market showed unexpected strength; data from the National Association of Realtors revealed that Pending Home Sales rose by 3.3% in November, marking their highest level since early 2023.
The Federal Reserve reduced the federal funds rate by 25 basis points (bps) at its December meeting, bringing the target range to 3.50%–3.75%. This marks a cumulative reduction of 75 bps in 2025 as the central bank navigates a cooling labor market and persistent inflation.
According to the CME FedWatch Tool, markets are now pricing in an accelerated easing cycle, with traders anticipating at least two additional cuts by the end of September 2026.
Technical Analysis
The USD/JPY pair is currently exhibiting a bullish reaction as it approaches a critical technical floor. The 100 and 200-period Moving Averages (MAs) are converging near the 155.80 price level, creating a formidable zone of dynamic support.
This area is increasingly significant as the price action appears to be carving out an Inverse Head and Shoulders pattern. This classic reversal formation, aligning with the broader prevailing trend, suggests that a renewed bullish extension from this support zone is highly probable.
From a momentum perspective, the Relative Strength Index (RSI) recently touched the 39 level. While this is well clear of overbought territory, the indicator is already rebounding from levels just below the neutral mark, signaling that the bullish impulse has substantial room to expand.
The primary upside objective remains the local high of 157.72. The pair has tested this ceiling twice without success; however, current momentum suggests a third attempt may be imminent. Traders should remain vigilant, as a forceful break and close below the 155.80 support zone would effectively invalidate this bullish setup and likely trigger a deeper technical correction.
Trading Recommendations
Trading direction: Buy
Entry price: 156.30
Target price: 157.70
Stop loss: 155.30
Validity: Jan 09, 2025 15:00:00
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