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USD/JPY: Upside Momentum From Macroeconomic Policy And Technical Markets
Forex
Summary:
Key drivers include the US Federal Reserve's (Fed) tight monetary policy, weakness in the Bank of Japan (BoJ), safe-haven flows, and strong technical signals. A deeper analysis will help clarify these factors....
Buy
CLOSEDUSDJPY
End Time
150.203
Entry Price
150.700
TP
149.800
SL
150.395 +0.812 +0.54%
403
Points
Loss
149.800
SL
149.800
CLOSING
150.203
Entry Price
150.700
TP
Today, the latest data from the US showed that the ISM Manufacturing PMI report came in at 49.0, below the expected 50.2, reflecting a contraction in the manufacturing sector. However, this was not enough to weaken the USD as other data remained strong. Notably, the Consumer Confidence Index in October rebounded to 104.3 from 100.2 in September, indicating that consumers remain confident in the economy.
More importantly, the Fed’s preferred inflation gauge, the core personal consumption expenditures (PCE) report, showed a 3.7% annual increase, remaining above the Fed’s 2% target. Jerome Powell has stressed that the Fed will keep interest rates high “for longer than expected” if necessary to bring inflation down to the desired level. These factors have pushed the yield on the 10-year US government bond to 4.85%, attracting international investment flows and boosting the purchasing power of the US dollar.
In contrast, the Bank of Japan (BoJ) has continued to maintain its monetary easing policy despite the pressure of imported inflation. Governor Kazuo Ueda has affirmed that YCC (yield curve control) will continue to be used to boost economic growth. However, this weakness has made the JPY less attractive amid the widening interest rate gap between the US and Japan.
Recent trade data from Japan showed that the trade deficit continued to widen, reaching -7.3 trillion yen in the third quarter, largely due to higher imported energy prices. This not only put pressure on the BoJ but also weakened the JPY further, creating conditions for USD/JPY to rise sharply.
Market trends
Amid rising global geopolitical tensions, safe-haven flows into the USD are adding to the strength of the currency. Brent crude oil prices rose to $87/barrel following news of new sanctions against Russia from the European Union. These fluctuations create uncertainty and encourage investors to seek safe assets such as the USD. In addition, information from the Joe Biden administration about a $1.2 trillion stimulus package to improve national infrastructure has added momentum to the US economy. At the same time, US companies continued to report better-than-expected profits in the third quarter, reinforcing positive sentiment in the US financial market.
Technical Analysis
On the M15 chart, USD/JPY shows that the Bollinger Bands are expanding, indicating increased volatility. The current price is trading above the 20-period moving average (MA20), a clear bullish signal. The Stochastic Oscillator shows that the indicator is in the overbought zone (92.8), signaling a possible short-term correction, but the main trend remains up. The nearest resistance is identified at 150,700, while the nearest support is at 149,800. A break of this resistance could push the price higher, around 151,200 in the short term, if macro factors continue to support.
Trading Recommendations
Investors should consider opening a long position around the current price of 150,200, with a short-term profit target of 150,700 and a long-term target of 151,200. Stop loss should be placed at 149,800 to minimize risk. Meanwhile, important upcoming economic events such as the non-farm payroll (NFP) data later this week should be monitored to adjust the strategy accordingly.
USD/JPY continues to maintain its bullish trend thanks to the combination of the Fed's tight monetary policy, the BoJ's easing policy, and safe-haven flows into the USD. The latest economic data from the US and Japan continue to reinforce this trend. Investors should take advantage of short-term trading opportunities while the market still favors the USD.
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