- The upward stability dominates the performance of the USD/JPY currency pair before the announcement of the US economic growth reading later today.
- The dollar/yen price is stable around the 150.60-resistance level.
- As we mentioned before, the divergence between the hawkish policy of the US Federal Reserve and the Bank of Japan, which has a negative interest rate, unique among all other central banks in the world, is a factor that will support the gains of the currency pair for a longer period.
But what is expected for the price of the US dollar in the upcoming days?
Flows at the end of February are likely to weaken the US dollar, according to Credit Agricole's assessment of potential flows in the foreign exchange market at the end of the month. According to analysts at the European bank, the performance of the US dollar in February indicates moderate dollar selling at the end of the month, especially against the Canadian dollar and the Australian dollar.
According to Credit Agricole analysts, “Global stock markets were broadly more stable in February. In the Forex market, the US dollar was broadly firmer during the month. In general, movements in equity markets, when adjusted for market capitalization and foreign exchange performance this month, indicate that portfolio rebalancing flows at the end of the month. Obviously, there is likely to be moderate selling of the US dollar across the board with the strongest sell signal in the case of the US dollar against the Canadian dollar and the Australian dollar.”
But what is end-of-month rebalancing?
Credit Agricole explains that global portfolio managers re-hedge their currency exposure at the end of the month to maintain currency benchmarks, influenced by the change in equity performance and FX movements. This rebalancing activity, which is typically felt around 16:00 in London on the last trading day of the month, generates signals for all USD/G10 currency pairs, indicating the expected direction and strength of forex flows in end of the month.
USD/JPY Technical Analysis and Expectations Today:
The overall trend for the USD/JPY currency pair remains bullish and will continue as long as it remains stable above the psychological resistance at 150.00. therefore, if US economic growth figures and the Federal Reserve's preferred inflation reading come in stronger than expected, bulls may find an opportunity to move towards nearest resistance levels at 150.85, 151.30, and 152.00 respectively. Conversely, based on the performance on the daily chart attached, a reversal to a bearish trend will not occur without a move towards the support level at 148.80 again.
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