Fundamental analysis USDJPY for 02.05.2024

On Wednesday, the Japanese Yen (JPY) rallied to a two-week high against the US Dollar (USD), fueled by speculation of further intervention by Japan's financial authorities to bolster the domestic currency. This followed USD selling post-FOMC, pulling the USD/JPY pair down to 153.00. However, the JPY trimmed gains, regaining strength above 156.00 during Thursday's Asian session.

Japanese Ministry of Finance-led buying sent USD/JPY plummeting to a two-week low, though momentum waned near 153.00. Currency diplomat Masato Kanda remained ambiguous about intervention, promising disclosure later. Bank of Japan's March meeting minutes stressed the need for ongoing financial support for domestic demand-driven recovery.

BoJ's decision to maintain near-zero rates and continue bond purchases contrasts sharply with the Fed's hawkish stance. Despite the Fed's cautious approach to inflation and projected rate cuts, some USD buying buoyed the USD/JPY amid a risk-on sentiment, weakening the JPY's safe-haven appeal.

Fed Chair Jerome Powell acknowledged inflation's decline but expressed uncertainty about future progress. With futures pricing in easing, USD demand regained strength, supported by positive US equity markets, further diverting flows from the JPY.

Attention now turns to US economic data releases, particularly the Nonfarm Payrolls report, while traders await indicators such as Challenger Job Cuts, Weekly Initial Jobless Claims, and Trade Balance figures for market direction.

Technical analysis and scenarios:

The Alligator is currently dormant, indicating that there is no clear trend as the moving averages intertwine. This indicates a period of consolidation or flat movement in the market. Awesome Oscillator (AO) and Accelerator Oscillator (AC) are in the gray zone, showing divergence. This divergence does not provide a clear signal to open positions, indicating uncertainty in market momentum.

Main scenario (BUY)

Recommended entry level: 156.350

Take profit: 157.000

Stop loss: 155.575

Alternative scenario (SELL)

Recommended entry level: 155.575

Take profit: 154.750

Stop loss: 156.350