On Wednesday, the USD/JPY experienced an increase, reaching a level of 153.50. The yen relinquished a portion of the gains achieved in the prior session, notwithstanding robust foreign trade statistics. In January, Japan experienced a significant increase in exports, marking the fastest growth in over three years, largely fueled by strong demand for AI-related chips. This data heightened expectations for ongoing policy normalization by the Bank of Japan. Simultaneously, the lackluster fourth-quarter GDP, which fell short of expectations and narrowly averted a technical recession, is dampening optimism. Investors are of the opinion that Prime Minister Sanae Takaichi’s economic policy may bolster growth and, in turn, provide a rationale for a gradual increase in interest rates.
The market currently reflects an expectation of a potential tightening policy in April. The IMF has previously asserted that it does not establish a specific target level for the yen, maintaining that the exchange rate is influenced by market dynamics. On the H4 chart, USD/JPY has entered a period of consolidation after experiencing a significant decline from 157.50 to 158.00. The price is presently situated within the range of 152.25–153.80. The Bollinger Bands have contracted significantly, suggesting a reduction in volatility and that the market is establishing a foundation. The range of 153.80 to 153.95 signifies the closest resistance level. Support is positioned at 152.25. Provided that the price stays beneath 153.80, the market structure continues to exhibit a neutral to bearish stance.
On the shorter H1 time frame, there is a brief local rebound from 152.80–153.00, accompanied by an effort to break out towards the upper boundary of the range. The price is nearing 153.90, at which point robust intraday resistance is developing. A breach of 153.95 would pave the path towards 154.60. The inability to surpass resistance may lead the pair to retreat to 153.00, subsequently moving towards 152.25. Overall, the market is consolidating in anticipation of a potential shift. A breakout from the established range will determine the trajectory of subsequent movements. In conclusion, the USD/JPY currency pair is currently influenced by opposing fundamental elements: strong export figures bolster expectations for Bank of Japan normalization, while sluggish GDP growth and political instability constrain the strength of the yen.
The pair is currently consolidating within a narrowing range, indicating a potential forthcoming directional breakout. The prevailing neutral-bearish sentiment remains intact as long as the price stays beneath the resistance level of 153.80–153.95. A decisive move above this level would aim for 154.60, whereas a failure could lead to a reexamination of the 152.25 support level. As attention turns to the BoJ’s April policy meeting, the market anticipates a new catalyst for the next significant move.