USDJPY Weekly Analysis 25/01/2025
Satheesh V
Fundamental Analysis
The USD/JPY pair rebounded from losses inspired by the Bank of Japan's (BoJ) recent monetary policy adjustments, climbing to the 156.60 level on Friday. Despite the initial bullish response to the BoJ’s rate hike, the Japanese Yen (JPY) reversed gains, reflecting the complex interplay of market expectations and central bank guidance.
Bank of Japan’s Rate Hike and Market Reaction
The BoJ raised its benchmark interest rate by 25 basis points to 0.5%, marking a rare move toward tightening monetary policy. Initially, this bolstered the JPY as traders anticipated a shift toward a more hawkish stance. However, Governor Kazuo Ueda’s comments during the subsequent press conference tempered market enthusiasm. Ueda emphasized the absence of a "preset" policy-tightening path, stressing a data-dependent approach to future decisions.
This cautious stance highlighted the central bank's intention to maintain flexibility, reducing the appeal of the Yen despite the rate hike. Additionally, dissent within the BoJ, as evidenced by policymaker Toyoaki Nakamura’s opposition to the hike, signaled a lack of consensus, further dampening market confidence in the Yen's sustained strength.
2. Key Resistance Levels
156.75 (H4 Liquidity):
A critical level where significant liquidity resides. Price may approach this level before a potential rejection.
157.07 (Daily Fair Value Gap):
Acts as a key resistance zone, with price likely to encounter selling pressure.
157.82 (H4 Fair Value Gap):
An unfilled imbalance that could act as a price magnet, attracting upward moves before reversing.
158.19 (H4 Liquidity):
An extended liquidity target that may mark the peak of a short-term rally.
4. Trading Plan
Bearish Bias:
Look for price to test resistance levels (156.75, 157.07, or 157.82) before rejecting lower.
Short entries can target 154.76 initially, with extended targets at 153.80 if bearish momentum sustains.
Bullish Setup:
Monitor price action at 154.76 and 153.80 for signs of reversal, such as bullish engulfing candles or order block formation, to enter long positions.
3. Key Support Levels and Short Targets
154.76 (H4 Liquidity):
A primary target for bearish moves, where price could consolidate or reverse upward.
153.80 (Weekly Fair Value Gap):
A deeper target for extended bearish moves, offering a strong buying opportunity.
5. Summary
USD/JPY is in a consolidation phase, with a potential bearish breakout targeting key liquidity zones. Resistance levels at 156.75 and above could attract price before selling pressure resumes. Traders should watch for reversal patterns at 154.76 and 153.80 to position for potential bullish moves.
Use your strict money management rules to manage risks effectively.
Technical analysis
1. Overview of Momentum and Market Structure
Current Momentum: Sideways consolidation.
Previous Week's Performance: The pair traded within a tight range, reflecting indecision in the market.
Range: 154.76–156.75.
Expectations: A bearish breakout is anticipated above the current range, with potential for downside movement toward key liquidity levels.