The USD/JPY pair deepened its losses, falling to 155.757, marking a significant continuation of the downtrend after its sharpest daily decline in over six weeks. The pair has broken below the 20-day exponential moving average (EMA), signalling sustained bearish pressure.
Market analyst Matt Simpson from forex.com and City Index highlights a bearish engulfing pattern and a divergence on the daily Relative Strength Index (RSI), both of which point to further downside risks.
The Japanese yen’s recent surge against the dollar is driven by several factors. A major catalyst has been heightened speculation around changes to the Bank of Japan’s (BOJ) monetary policy. Recent remarks from BOJ officials have hinted at a shift away from ultra-loose policies, with rising inflation and strong wage growth creating conditions for potential adjustments. These developments have added to the yen’s appeal, as traders anticipate higher interest rates in Japan.
At the same time, the dollar is under pressure due to growing uncertainty about the Federal Reserve’s rate path. Softer inflation data and mixed U.S. economic indicators have prompted traders to reduce their expectations for further Fed tightening. This dynamic has contributed to the dollar’s decline and provided a boost for the yen.
Picture: USDJPY extends its decline to 155.757, with bearish momentum intensifying as MACD deepens and key resistance holds at 156.50. Learn more on the VT Markets app.
The 15-minute chart confirms the downward momentum, with USD/JPY posting a low of 155.596 during intraday trading. The MACD histogram shows growing bearish momentum, as the bars extend deeper into negative territory. Additionally, converging moving averages (5, 10, and 30 periods) reflect the increasing dominance of sellers in the market.
The breach of the 156.00 psychological level places key support levels in focus. Simpson notes that an eventual break beneath 156.00 could lead to further declines toward the 50-day EMA at 154.86 and the monthly pivot point at 154.63.
The inability to recover above the 20-day EMA underscores a continuation of bearish sentiment.
The pair’s movement will depend on several factors, including BOJ policy decisions, which could significantly shift yen dynamics. Upcoming U.S. economic reports, particularly inflation and labour market data, will also influence the dollar’s strength.
USD/JPY remains under pressure, with technical and macroeconomic indicators pointing to sustained downside risks. Market participants should watch for a break of key levels to confirm the next directional move.
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