The USDJPY currency pair stabilized on Thursday after a volatile session on Wednesday, caused by comments from the Federal Reserve (Fed) chief Jerome Powell. He dismissed expectations of an interest rate cut in March, which led to a rise in the dollar.
On Wednesday, the U.S. central bank left interest rates unchanged and quashed hopes of a possible cut in the spring. However, the Fed indicated a possible rate cut later this year.
As Jerome Powell stated, inflation is slowing further and the U.S. economy, as well as the labor market, remain resilient. Interest rates have reached their peak, the central bank chief noted.
As the chairman emphasized, the unemployment rate of 3.7% indicates a strong labor market. As of December, the personal consumption expenditures price index was 2.6% year-on-year.
According to LSEG's IRPR interest rate probability app, expectations of monetary policy easing in the U.S. in March fell to 35.5% from 90% recorded at the end of 2023. However, the probability of easing in May rose to 96%.
Investors now await Friday's Nonfarm Payrolls (NFP) report for January.
However, the yen is countering the dollar's strong gains amid falling U.S. Treasury yields, driven by investors' desire for safer assets due to problems at the American regional lender New York Community Bancorp.
The USDJPY quotes are forming a new uptrend on the H4 timeframe.
In terms of wave analysis, the price is in the process of forming the fourth descending wave on the H2 timeframe. Divergence of the Relative Strength Index (RSI) indicator (standard values) indicates a possible change in price direction towards growth and the formation of a new upward wave.
Short-term prospects for USDJPY suggest buying.
The target is at the level of 149.90.
Part of the profit should be taken near the level of 148.60.
A stop-loss could be placed at the level of 145.20.
The bullish trend is short-term, so trade volume should not exceed 2% of your balance.