The USD/JPY pair remains one of the most traded currency pairs globally due to Japan’s traditionally low-interest rates and the U.S. dollar’s stability. As of September 2024, the pair continues to show volatility, influenced by global economic data, monetary policies, and geopolitical events. The USD/JPY had seen significant movement throughout the year, driven by the divergence between the Federal Reserve‘s tightening policy and the Bank of Japan’s (BoJ) loose monetary stance.
Recent Market Overview
As of early September, the USD/JPY pair is hovering around the 145-150 range, reflecting an upward trend following the U.S. Federal Reserve’s stance on maintaining higher interest rates to combat inflation. Meanwhile, the Bank of Japan continues its ultra-loose monetary policy, keeping interest rates negative (-0.1%) and emphasizing the need for more inflation before adjusting policy. The widening interest rate differential between the two economies remains a key driver of USD/JPY strength.
The yen’s weakness has been exacerbated by Japan’s continued trade deficits and the slow recovery in domestic demand. The U.S. dollar has been further supported by higher U.S. Treasury yields, which have attracted investors away from low-yielding assets like the yen. As a result, the USD/JPY pair has been relatively bullish throughout 2024.
Technical Analysis for September 2024
Key Support and Resistance Levels
- Support levels: 145.50, 143.00, and 140.80
- Resistance levels: 149.90, 152.00, and 155.00
The pair is currently trading near the 145.50 support level, which has acted as a crucial floor throughout the summer months. The 200-day moving average is also nearing this range, providing further support. On the upside, a break above the 149.90 resistance could pave the way for the pair to challenge the 150-152 level, last seen in 2022, when the Japanese government intervened in the currency markets to stem yen weakness.
Fibonacci Retracement Analysis
Applying Fibonacci retracement from the significant low of 75.50 (2011) to the high of 151.94 (October 2022), the pair is now approaching the 50% retracement level at 143.00, which could offer strong support. A breach of this level could lead to further downside, with 140.80 being a key psychological support level.
Moving Averages and Momentum
The 50-day moving average (MA) stands around 147.00, while the 200-day MA is slightly lower, around 143.50. Both MAs indicate a bullish bias, but short-term corrections could occur if the pair fails to sustain its current upward momentum.
The Relative Strength Index (RSI) is nearing overbought levels at 68, suggesting a potential pullback if the pair fails to break through the 150.00 resistance. However, if the RSI moves above 70, it may indicate that bullish momentum could persist for longer.
Fundamental Outlook
U.S. Economic Data and Fed Outlook
In September, the focus will be on U.S. inflation data, employment figures, and the Federal Reserve’s monetary policy decisions. With U.S. inflation remaining elevated, there’s little sign that the Fed will ease its tightening cycle soon. This could further support the dollar, pushing USD/JPY higher.
Japan’s Economic Conditions and BoJ Policy
Japan’s economy continues to struggle with deflationary pressures and low growth. The Bank of Japan, under Governor Kazuo Ueda, has maintained a dovish stance. However, there are speculations that the BoJ could start adjusting its policy by late 2024 if inflation continues to rise. Such a shift would provide some relief for the yen, but until then, the USD/JPY pair remains fundamentally bullish.
Geopolitical Factors
Geopolitical tensions, particularly in East Asia, could also impact the USD/JPY. If tensions between the U.S. and China escalate, investors may seek safety in the U.S. dollar, further boosting the pair.
Conclusion and Outlook for September
In the near term, USD/JPY is likely to remain bullish, supported by the interest rate divergence between the U.S. and Japan. However, traders should watch for key economic data from both countries and any potential policy shifts by the BoJ. A breakout above 150.00 would signal strong bullish momentum, while a drop below 143.00 could indicate a deeper correction.
Trading Strategy
- Bullish strategy: Buy at current levels with a target of 150.00. Set a stop-loss below the 145.50 support level.
- Bearish strategy: Sell if the pair drops below 145.00, targeting the 143.00 Fibonacci level. Set a stop-loss above 147.50.
This analysis suggests that the USD/JPY pair is poised for continued volatility in September 2024, with both technical and fundamental factors pointing to bullish opportunities in the near term.