USD/JPY Daily Chart Analysis – 2023-12-08

The USD/JPY pair has recently shown bearish momentum, as evidenced by the sustained downtrend and the bearish moving average crossover.Notable is the sharp decline preceding the current consolidation phase. The moving averages have executed a bearish crossover (MA Cross), which generally indicates a strong bearish trend. The market is now testing a potential resistance zone around the 144.580 level, with Fibonacci retracement levels marked at 0.382 (142.285), 0.5 (141.576), 0.618 (140.867), and 0.786 (139.858), offering possible support levels should the bearish momentum continue. Japanese Finance Minister Suzuki’s warning about volatile FX moves and the overall weak data from Japan add to the cautious sentiment in the market.

However, given the current price consolidation and the slight upward tick in the Momentum indicator, there is a possibility of a short-term corrective rally or a sideways movement. The Fibonacci retracement levels serve as potential targets for such a move. If the price breaks above the immediate resistance near 144.580, it could target the next Fibonacci level at 0.382 (142.285). Conversely, a failure to breach this resistance could see the pair retesting the recent lows near the 142.50 level.

The upcoming Non-Farm Payrolls (NFP) and Consumer Price Index (CPI) data will be critical. The market has expectations of a 180K increase in NFP and an unemployment rate of 3.9%. Should the data meet or exceed expectations, this could bolster confidence in the U.S. economy, leading to bullish sentiment for the USD. Conversely, if the data disappoints, it could fuel expectations of a more aggressive rate-cutting stance by the Federal Reserve, potentially weakening the USD.

The short-term technical indicators suggest a potential for a mild corrective rally or continued consolidation, while the fundamental outlook hinges on imminent economic data releases. The market’s reaction to the NFP and CPI will be pivotal. If the data suggests that the Fed’s anticipated rate cuts are insufficient or excessive, it could trigger significant price movements. Given the recent bearish trend, any rallies may be short-lived unless supported by strong positive economic data from the U.S. The cautious remarks from Japan’s Finance Minister and the weak data add to the bearish pressure on the JPY, which may limit downside movements for the USD/JPY pair. The interplay between these technical and fundamental factors will determine the pair’s direction in the near term.