Fundamental analysis of USD/JPY for 07.02.2024

USD/JPY declined during the Asian session and is trading around 147.900. 

Japan's Leading Economy Index, a composite indicator that forecasts macroeconomic conditions, rose to 109.4 from 107.6 in December, indicating that the yen could strengthen if the outlook improves. However, its impact on the BoJ's strategy, particularly the move to negative interest rates, remains uncertain. Inflation and wage growth remain the focus of the BoJ's attention. Recent data showed an unexpected 0.9% decline in household spending and lower-than-expected hourly wages, which could jeopardize the speed and timing of the economic recovery. 

Upcoming US trade data and comments from Federal Reserve officials could affect investor sentiment. Although the US trade deficit is expected to be positive for the greenback, the main factor in the pair's divergence is still the Fed's interest rate stance, which depends on the strength of the US economy. 

Meanwhile, the yen is looking for strength after recovering from this year's decline against the dollar on hopes that the rate will be raised and the Bank of Japan's ultra loose monetary policy will end for the long term. However, continued declines in real prices and household spending in Japan have dampened this optimism, while domestic issues and changes in the global economy provide a challenging backdrop for the value of money. Despite these pressures, the dollar rebounded from a three-month high and hawkish comments from the Fed, supported by strong employment growth and rising U.S. bond yields. Nevertheless, global stock market trends and geopolitical events remain the main factors influencing market dynamics and short-term currency movements. In fact, the interplay between central bank policies, economic indicators and global market sentiment continues to drive USD/JPY movements, with investors looking to events as indicators of future trends.

Technical analysis and scenarios:

Given that the Alligator indicator is "sleeping" along with the curled moving averages, this suggests that the market is now in a consolidation phase without a clear trend. However, the Awesome Oscillator (AO) and Accelerator Oscillator (AC) being in the red zone and near the zero level indicates that the bearish momentum is building up. This situation often indicates a potential downward move.

Main scenario (SELL)

Recommended entry level: 147.350

Take Profit: 146.800

Stop Loss: 147.550

Alternative scenario (BUY)

Recommended entry level: 148.250

Take Profit: 148.650

Stop Loss: 148.000