The USD/JPY pair continues its winning streak, extending gains for the fourth consecutive session. Investor optimism regarding a soft landing in the US economy, supported by positive post-US CPI Report recovery, has been bolstering the dollar. Today is expected to be a busy day for USD/JPY traders, with a focus on Japan trade data and upcoming US job-related announcements.
The morning brings heightened activity for USD/JPY traders as they closely monitor Japan's trade data. The latest economic indicators from China indicate weak global demand and deteriorating trade conditions, posing challenges for export-driven economies. Economists forecast a narrowing trade deficit for Japan, with projected growth in exports. However, the attention will shift to trade terms with China and the US, as these key trading partners play a crucial role in Japan's economic outlook.
Japan's trade balance heavily relies on its exports and imports with China and the US. Weakness in exports to these countries would signify diminishing demand and raise concerns about Japan's economic prospects. Conversely, rising exports and imports would be viewed as bullish indicators. However, a combination of increasing exports and declining imports could indicate a weak demand outlook, which would have a bearish impact.
While the Bank of Japan will take into account the trade data when assessing the macroeconomic environment, traders must wait until Friday for national inflation figures to determine whether any adjustments will be made to the central bank's ultra-loose monetary policy stance. Additionally, during the US session, attention will be on jobless claims and the Philly Fed Manufacturing Index. Given the contraction of the US manufacturing sector in recent months, jobless claims are expected to have a more significant influence on market sentiment.
Analyzing the USD/JPY price action, the daily chart indicates a breakout above the resistance band of 139.5 - 138.8, approaching the psychological level of 140. However, the pair remains below the 50-day exponential moving average (EMA) while staying above the 200-day EMA, indicating bearish momentum in the short term but bullish momentum in the longer term. The 4-hourly chart supports this analysis, with the USD/JPY facing strong resistance at 140. The 50-day and 200-day EMAs provide additional resistance levels, while the RSI signals bullish sentiment. Traders should carefully monitor these technical indicators to make informed Forex trading decisions.
Forex traders closely follow news and events that impact currency pairs, including USD/JPY. Today's focus on Japan trade data and upcoming US job-related announcements will likely influence market sentiment. Weak trade figures from Japan could weaken the yen and strengthen the dollar, leading to an appreciation in USD/JPY. Conversely, positive trade data combined with strong US job indicators may result in a weaker dollar and a decline in USD/JPY. Traders should carefully analyze the market conditions and use technical indicators to navigate the potential fluctuations in the Forex market.