After the recent selling operations, to which the USD/JPY exchange rate was exposed, we recommended our valued clients consider buying the currency pair from the support level of 130.30, coinciding with the movement of technical indicators towards oversold levels and also with the calming of fears of further collapse.
On the other hand, the US Federal Reserve's expectations were not changed slightly with the average forecast indicating that FOMC members still envision only one rate hike over the course of the year. This is why some analysts are now more confident in the opinions and forecasts that dollar exchange rates have peaked and are likely to fall further.
There are still nuances in and between these forecasts, however, some of which can be found in whole or in part below.
Commenting on performance and influence factors. “Markets will settle into the expectation that the Fed will just hike again, signaling the beginning of the much awaited ‘Federal Pivot’ on the dollar,” said Joe Tukey, head of forex analysis at Argentex.
“As for the euro, continued commitment to further gains from the European Central Bank, resilient data range, upward movement on the technical chart, and declining dollar strength point to steady gains in 2023,” he added.
For his part, Gene Foley, Forex Analyst at Rabobank, said that “Before the financial sector crises this month, it may have seemed that the effects of higher interest rates were being felt most strongly in countries where household mortgage rates were fixed for a short period of time. This is certainly the factor that contributed to the policy pause and the BoC has added to the talk of an upcoming pause from the RBA. It is now clear that tighter monetary conditions have a much greater impact.”
“It is too early to draw strong conclusions, but if the FOMC is more concerned about tightening credit conditions than European central banks, there could be a larger impact on Fed policy,” the analyst continued. “In response to the Fed's speech this week, we have revised our forecasts downward to the peak in the policy. We now see room for just one rate hike, compared to previous expectations of a 25 basis point rate hike. This has negative implications for our outlook for the US dollar,” he added.
USD/JPY Technical Outlook:
According to the performance on the daily chart below, attempts to recover for the USD/JPY currency pair lack momentum, and to get out of a bearish look on the bulls, rushing towards the resistance levels 132.85 and 135.30.
On the other hand, over the same time period, the 130.00 psychological support level will remain the most important to confirm the strength of the trend. Downward year, and in general, I still prefer to buy the currency pair from every downward level.
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