Japanese Yen, US Dollar, NFP Talking Points:
Over recent weeks, the safe-haven US Dollar (USD), Japanese Yen (JPY) and Swiss Franc (CHF) have remained resilient against their major counterparts as the war between Russia and Ukraine remains at the forefront of risk-sentiment.
Since September last year, increased pressure on the Federal Reserve to reduce the ballooned balance sheet and to curb rising inflation has supported USD/JPY as the BoJ (Bank of Japan) maintains its dovish stance.
Find out more about the impact of interest rates on the foreign exchange market
With Fed Chair Jerome Powell committed to raise rates at the upcoming March FOMC meeting and put an end to the aggressive bond-purchasing program, rising geopolitical tensions and surging commodity prices (oil, wheat and gas) have reduced the probability of a 50 basis point (b/p) hike this month.
Although the release of the NFP (non-farm payroll) report is considered to be a major risk event, the hawkish rhetoric from Powell and the unprecedented consequences of the war will likely result in a more conservative pace at which the Fed raises rates.
DailyFX Economic Calendar
USD/JPY Technical Analysis
USD/JPY price action is currently trading in a well-defined range, formed by key Fibonacci levels from historical moves of prominence. Although the upward trajectory has remained intact (Since Sep 2021), a break below the rising wedge allowed bears to temporarily drive prices lower before finding support at around 113.492.
Since then, bulls have managed to drive price action back towards the lower bound of the wedge which is currently holding as resistance at around 116.265.
USD/JPY Weekly Chart
Chart prepared by Tammy Da Costa using TradingView
As prices remain above the 50-day moving average (MA), the CCI (commodity channel index) continues to threaten the upper bound of the range, a potential indication that the pair may be entering into overbought territory.
USD/JPY Daily Chart
Chart prepared by Tammy Da Costa using TradingView
As bulls aim to regain control of the trend, a break above 116.00 could see prices rising towards the January high (116.639) which then opens the door for a test of the 2017 high (118.667)
However, if bears are able to exert pressure and drive prices lower, a break of 115.000 and increased selling pressure could drive price action back towards 113.00 with the next level of support holding steady at the 112.441 (the 50% retracement of the 2015 – 2016 move).
— Written by Tammy Da Costa, Analyst for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707
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