BoJ officials stated that the ongoing recovery of the US Dollar dampens investor optimism regarding the Bank of Japan's (BoJ) decision to end its ultra-loose policy following its December meeting.
The Yen was under downward pressure due to the BoJ's officials' dovish remarks. There is limited urgency to discontinue the adversary interest rate policy, which cites inadequate evidence that wage growth sustains inflation.
Post NFP Sentiment Extended USD Bulls
This occurrence bolstered USDJPY's upward momentum, which had already been established subsequent to Friday's US Nonfarm Payrolls report. The United States economy surpassed expectations for job creation in November, as unemployment declined and wage inflation accelerated. Early in 2024, expectations of Federal Reserve rate cuts were dashed by the robust performance of the US labor market, resulting in increased US yields and a stronger US Dollar.
Monday's investor sentiment was unstable as disappointing consumer inflation data from China continues to weigh. The Consumer Price Index (CPI) of China experienced its most sluggish expansion in the previous three years, which could indicate a global economic slowdown.
Increasing tensions in the Middle East contribute to a decrease in risk appetite in the eve of central bank decisions this week. Investors focus is shifted to this week's FOMC, which could be indicate the future path of the US Dollar Index (DXY).
USDJPY Technical Analysis
In the daily chart of USDJPY, a strong bearish pressure is seen with no sign of a continuation. After making a significant low below the 20 day EMA, price rebounded sharply with a potential V-shape recovery. However, the bottom is not confirmed as the price is yet to make a new swing high above the previous weekly resistance.
In this context, investors should closely monitor how the price trades at the 147.31 level, which is the immediate resistance level. The primary approach is to wait for a daily candle above the 147.40 level before aiming for the 150.00 psychological level.
On the other hand, the dynamic 20 EMA is still above the current price and acts as a crucial resistance. In that case, a bearish rejection from the 147.31 resistance could limit the gain and lower the price towards the 144.00 area.