USD/JPY Daily Chart Analysis

The USD/JPY currency pair has displayed signs of a possible bullish reversal as it continues to consolidate within a range. Trading within Thursday’s range of 148.89 to 149.53, as per EBS data, suggests a temporary halt in the dollar’s decline. While holiday trading has led to thinner volumes, there are early indications that the dollar’s recent decline might be coming to an end. Notably, there are significant USD/JPY options expiring around the 149 level on Thursday. Additionally, the 30-day correlation between USD/JPY and EUR/JPY has risen above +0.50, indicating a potential shift in sentiment.

In the USD/JPY market, stability has been observed with support on dips, and the pair has been trading in the range of 149.41 to 149.71 during the quiet pre-weekend trading period. This stability is partially attributed to higher U.S. Treasury yields, with the 10-year yield increasing by 4 basis points to 4.4570% compared to the previous New York close. Traders have been scaling back on dovish Federal Reserve bets as concerns about U.S. inflation persist. While Japanese inflation has shown some growth, it fell short of expectations. Core CPI, forecasted at 3%, only reached 2.9%, with CPI excluding energy and food registering a +4%. Concurrently, Japan’s factory activity has contracted for the sixth consecutive month due to weak demand. Resistance levels for USD/JPY are seen at 150.00-10 and 150.50, while support is identified at 148.90-149.00 and 148.50-60. These factors contribute to a complex trading environment for USD/JPY, with potential implications for its future direction.