Following Tuesday’s one-week low caused by lower US CPI, the USD/JPY has now recovered. The JPY is weakened and supported by the gloomy Japanese GDP and risky sentiment. US gains are constrained by bets that the Fed will stop hiking rates.
Wednesday sees USD/JPY dip-buying near 150.20 and a slight rebound from Tuesday’s US CPI-led losses to a one-week low. Spot prices have risen today by around 0.30%, to 150.65, but have failed to sustain that gain.
According to figures released on Wednesday, the Japanese economy shrank for the first time in three quarters, giving the Bank of Japan more time to delay ending its stimulus program of a decade. The safe-haven Japanese yen also gets weakened in a risk-on environment, which helps the USD/JPY pair.
After weaker US consumer inflation reiterated forecasts that the Fed is done tightening policy, the USD is around its lowest level since September 1. Bearish traders should exercise caution before re-entering the USD/JPY market.
Spot prices stayed above the 150.00 psychological barrier and the 100-period Simple Moving Average (4-hour chart). This area should be decisive for USD/JPY as it corresponds with the 200-period simple moving average on the 4-hour chart and is followed by an ascending trend-line from the bottom in October to 149.70.
If the support levels are decisively broken, bearish traders will be triggered, and the market will plunge. The next potential support for the USD/JPY is 149.20-15 and 149.00.
On the other hand, the 151.00 area could present a barrier to further gains before the 151.20 zone and Monday’s yearly high of 151.90. If a follow-through buying pushes the price above 152.00, it could incite bullish traders and prolong the uptrend since the beginning of the year.
Trade Idea:
Caution prevails as USD/JPY hovers around 150.65. Watch for a breach below 150.00, signaling a potential downtrend, with support at 149.20–149.15. Upside resistance at 151.00 and 151.20 may challenge bullish momentum while breaching 152.00 could signify a robust uptrend continuation.