USD/JPY Weakness Curbs Threat of Currency Intervention

US Dollar Outlook: USD/JPY

USD/JPY appears to be reversing ahead of the monthly high (153.86) as it falls toward the weekly low (153.28), with the recent weakness in the exchange rate keeping the Relative Strength Index (RSI) below 70.

USD/JPY Weakness Curbs Threat of Currency Intervention

The decline in USD/JPY may curb the threat of a currency intervention as the rally following the US election seems to be unraveling, and the exchange rate may continue to give back the advance from the monthly low (151.29) as Federal Reserve Governor Lisa Cook prepares US households and businesses for lower interest rates.

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In turn, the US Dollar may face headwinds ahead of the Fed’s last meeting for 2024 as the central bank insists that ‘in the near term, the election will have no effects on our policy decisions,’ and USD/JPY may struggle to retain the rally from the monthly low (151.29) if it fails to defend the weekly low (153.28).

With that said, USD/JPY may consolidate over the remainder of the month as the Fed moves toward a neutral stance, but the exchange rate may attempt to further retrace the decline from the yearly high (161.95) as the Bank of Japan (BoJ) shows little interest in pursuing a rate-hike cycle.

USD/JPY Price Chart – Daily

Chart Prepared by David Song, Strategist; USD/JPY on TradingView

USD/JPY struggles to extend the advance from earlier this week amid the failed attempt to close above 156.50 (78.6% Fibonacci extension), with a close below 153.80 (23.6% Fibonacci retracement) raising the scope for a move towards 151.95 (2022 high).
Failure to defend the monthly low (151.29) may push USD/JPY back towards the 148.70 (38.2% Fibonacci retracement) to 150.30 (61.8% Fibonacci extension) zone but the exchange rate may attempt to further retrace the decline from the yearly high (161.95) should it hold above the weekly low (153.28).
Need a close above 156.50 (78.6% Fibonacci extension) to bring the 1990 high (160.40) on the radar, with the next area of interest coming in around the July high (161.95).

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--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

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