Taking a broader perspective, the fundamental backdrop isn't as robust as it was in the past year. There are several key factors at play. Firstly, the Bank of Japan (BoJ) is contemplating an exit from Negative Interest Rate Policy (NIRP) within the next 12 months. Secondly, the Federal Reserve is expected to conclude its tightening cycle.
Despite these considerations, the data currently doesn't provide strong support for a downside move in USDJPY. The U.S. economy continues to display resilience, while wage growth in Japan is experiencing a deceleration. This complex interplay of factors presents an intriguing landscape for USDJPY traders to navigate.
Examining the 4-hour chart, it's notable that the earlier decline triggered by comments from BoJ Governor Ueda during the weekend has been entirely reversed. Currently, the currency pair is poised for a potential breakout to the upside.
In the immediate context, the key levels to monitor are the resistance at 147.81 and the ascending trendline. A decisive breach above the resistance level is likely to trigger a rally, potentially propelling the pair toward the significant psychological barrier at 150.00.
Conversely, should the trendline be breached to the downside, it could pave the way for a more substantial retracement, potentially targeting the support zone around 145.00. The intricate dynamics at play make this an intriguing juncture for traders in this pair.
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