USD/JPY Daily Chart Analysis

The USD/JPY pair has demonstrated resilience amid market de-risking, managing to find support at the critical 153.60 level, coinciding with the 20-day Moving Average—a favored metric for dip-buyers. The formation of a doji candle on the daily chart indicates a state of indecision among traders, characterized by a long-legged doji that closed near its opening and high, hinting at a potential equilibrium between buyers and sellers after a period of uncertainty.

Technically, the currency pair is trading within an ascending channel, showcasing a robust uptrend over the past months. The Momentum indicator remains positive, suggesting continued buying interest, while the Relative Strength Index (RSI) hovers below overbought territory, providing room for potential upside before any significant retracement. The breach above the psychological resistance of 155 could pave the way for further gains, with the Fibonacci extension levels at 155.50 serving as the next target.

Fundamental Analysis

From a fundamental perspective, the International Monetary Fund’s (IMF) Japan mission chief’s remarks about the weak yen potentially benefiting Japan’s economy add a positive tone to the yen’s medium-term outlook, potentially enhancing export competitiveness and improving corporate earnings repatriated from overseas. On the other side, the Bank of Japan (BoJ) Governor Ueda’s hint at possible rate hikes due to yen-led inflation introduces a variable that could lead to a policy shift, an event that typically yields significant currency volatility.

Market participants are likely to weigh the BoJ’s stance against the Federal Reserve’s current policy, which, if remains on hold, could limit the USD’s upside against the yen. However, any sign of weakening U.S. data tied to Fed policy could shift this dynamic, providing the yen with a chance to recover some of its losses.

Overall Market Sentiment

The sentiment around the USD/JPY pair appears cautiously optimistic with a 55% Positive, 30% Neutral, and 15% Negative breakdown. The positive sentiment is largely fueled by the strong technical position of the pair within the ascending channel and the ongoing bullish momentum. However, the uncertainty introduced by the BoJ’s signaling towards potential rate hikes, coupled with the current Federal Reserve policy, tempers this optimism, leading to a substantial neutral stance. The negative sentiment is limited yet present due to the possibility of intervention by the BoJ and potential shifts in U.S. monetary policy affecting the dollar’s strength.