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Analysis of the USD/JPY Pair: Bulls Anticipate a Breach Of a One-Week-Old Trading Range; US CPI is in Focus
On short-term charts, USD/JPY remains confined within a familiar range, forming a rectangle. The technical configuration appears to be bullish and provides support for potential additional gains. Traders appear hesitant and prefer to remain on the sidelines pending the US CPI report at this time.
During Thursday's Asian session, the USD/JPY pair fluctuates within a narrow trading band and is presently situated just above the 149.00 level, which is within striking distance of the weekly high reached the day before.
The Bank of Japan's (BoJ) persistent ultra-easy monetary policy and an overall positive risk sentiment are perceived to undermine the safe-haven Japanese Yen (JPY) and provide a tailwind for the USD/JPY pair. Nevertheless, the potential for growth is constrained due to the lacklustre performance of the US Dollar (USD), which is further weighed down by decreasing probability of additional interest rate increases by the Federal Reserve (Fed) and a continued decline in US Treasury bond yields.
Additionally, traders appear averse to aggressive directional wagers and would rather remain on the sidelines until the latest US consumer inflation figures are released later in the early North American session. The pivotal US CPI report will significantly impact market anticipations regarding the trajectory of future rate hikes by the Federal Reserve. Consequently, this will contribute to the determination of the subsequent leg of a directional move for the USD/JPY pair and stimulate USD demand in the near term.
Technically speaking, market prices continue to be contained within a range that has been established for the past week or so. The appearance of a rectangle on short-term charts signifies that traders are experiencing a state of indecision. Conversely, the price action that is constrained within a certain range could still be classified as a phase of bullish consolidation, given the rally that has occurred since the monthly swing low in July. Furthermore, daily chart oscillators continue to maintain their position in the positive.
The aforementioned configuration indicates that the USD/JPY pair faces least resistance to the upside. Before positioning for additional gains, it remains prudent to await a sustained breach through the 149.30-149.35 supply zone, which signifies the upper limit of the trading range. As hypothesised, the ensuing ascent may propel spot prices back towards the psychological 150.00 level, which has been identified as a possible intervention threshold.
A sustained advance beyond that point, nevertheless, would be regarded as a novel catalyst for bullish speculators and create an opportunity for an additional upward trajectory towards the round number of 151.00. The extension of the momentum could bring the USD/JPY pair nearer to the 152.00 level, which represents a multi-decade high last observed in October 2022.
Conversely, it appears that any substantial decline in value will find support in the vicinity of 148.55 to 148.50, which is prior to the weekly low near 148.15. Subsequently, the 200-period Simple Moving Average (SMA) is displayed on the 4-hour chart, precisely positioned beneath the 148.00 round figure at present. A strong decline below could push the USD/JPY pair to a level near 147.30, which would be the lowest level seen since September 14 and was tested last Tuesday.
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