Fundamental factors support USDJPY

16 November 2023 135
Fundamental factors support USDJPY

The USDJPY currency pair started Thursday's trading session with growth. The dollar holds its positions after two days of sharp decline caused by the publication of new economic data in the United States. Traders took the released data as a signal that the Fed would keep interest rates unchanged before gradually reducing them. 

 

The dollar index - which measures the greenback against the euro, yen and four other rivals - rose to 104.4 (+0.14%). The dollar drew support from better-than-expected retail sales numbers. Signs of a cooling inflation also indicate that the goal of the prevention of a recession in the US could be achieved. It allows the Fed more time before cutting rates.

The odds for a first reduction by March have been trimmed from nearly 34% to 25%, per the CME Group's FedWatch tool.

 

According to Convera, the US economy remains resilient despite falling inflation. Thus, the Fed is allowed to raise rates again in the short term.

 

Meanwhile, Japan’s exports rose at a slower pace in October. It didn't provide additional support to the country's economy, which is trying to avoid a technical recession in the second half of the year.

 

The value of exports gained 1.6% from a year earlier, the finance ministry reported Thursday. This is a slowdown from a 4.3% increase in the previous month. Economists had forecast a 1% increase.

 

Imports slipped 12.5% largely on the back of falling energy-related purchases. Still, the trade balance swung back to a deficit of 662.5 billion yen ($4.4 billion).

 

The Japanese currency has been hovering near its lowest level since last October. Then the government was forced to step in to support it for the first time in decades. This year the yen has dropped around 13% against the dollar.

 

The USDJPY pair is forming an upward corrective channel on the daily timeframe.

Fundamental factors support USDJPY - Photo 1

In terms of wave analysis, the price is forming the third ascending wave on the H1 timeframe. Breaking through the top of the first wave at 151.90 could strengthen the upward price movement.

 

Signal:

The short-term outlook for the USDJPY currency pair is to buy.

The target is at the level of 154.00.

Part of the profit should be fixed near the level of 151.90.

A Stop-loss should be placed at the level of 149.70.

 

The bullish trend is of a short-term nature, so it is suggested to limit the trading volume to no more than 2% of your capital.

This content is for informational purposes only and is not intended to be investing advice.

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