USD/JPY Analysis: August 06, 2024

USD/JPY Analysis: August 06, 2024 

The USD/JPY currency pair witnessing a decline of 5 consecutive days, gets reversed on Tuesday, August 6, 2024. Let’s take a closer look into it:

Fundamental Analysis

Key factors such as the Bank of Japan's policy rate, the Federal Funds Rate, and U.S. labor data significantly influenced the USD/JPY currency pair. 

On July 31, 2024, the Bank of Japan raised its interest rates more than expected, reaching a new high of 0.25%. Meanwhile, the Federal Reserve maintained its rates at 5.50%, as anticipated, and hinted at the possibility of rate cuts in September during the FOMC meeting.

Furthermore, the weak labor market data in the U.S., including the Non-Farm Employment Change and the Unemployment Rate released on Friday, August 2, 2024., caused the U.S. Dollar Index (DXY) to drop by approximately 0.58%, leading to a depreciation against the Japanese Yen, causing the currency pair to further decline.

Technical Analysis

Figure 1: USD/JPY, Daily-Timeframe, trading view

From a technical perspective, the USD/JPY currency pair is exhibiting a bearish momentum, confirmed by the 20 and 12 moving averages. If this downward trend continues, the pair could test the 140.870 support level, and if broken, it may further decline to 138.020, as per analysts analysis. On the daily time frame, there is a critical resistance level at approximately 146.493, which was reached today. If this resistance is breached, the pair could potentially test the 0.236 Fibonacci retracement level, aiming for a price of 148.446, as per analyst analysis.