Analysis of USD/JPY Market: Currencies Nearing a Clash Over FOMC Influence and Japanese Haven Safety

3 May 2023, Wednesday
Analysis of USDJPY Market Currencies Nearing a Clash Over FOMC Influence and Japanese Haven Safety

The Japanese Yen: A Safe-Haven Asset in Times of Economic Uncertainty


Market Influencers and Risk Aversion


The Japanese Yen has recently gained support due to concerns about a possible recession. Even though some market influencers, like JP Morgan CEO Jamie Dimon, believe that the crisis is almost over, many investors are still cautious and prefer to invest in safe-haven assets like the Yen. This has caused the Yen to rise in value.


US Economic Data and Fed Funds Futures


US regional banking shares have dropped, which could cause confusion for the Federal Open Market Committee (FOMC) in their decision making. However, the implied Fed funds futures still suggest a 25bps interest rate hike, which would be the highest level since 2007. The rest of the day is filled with US economic data that could cause short-term volatility in the market.


Valuable Data Inputs


Some important data inputs include the ADP employment change figure and the ISM services PMI print. These events are highly impactful because the US is primarily a services-driven economy. Although these releases are unlikely to change the Fed’s decision, they will give investors an idea of the state of the US economy going forward.


Technical Analysis


Looking at the daily USD/JPY chart, we can see that the price action is following a medium-term ascending triangle pattern. Bears have defended triangle support, which coincides with the 200-day moving average and the 137.91 March swing high. The Relative Strength Index (RSI) has also come off overbought levels, which may suggest a dovish slant to today’s data from a technical standpoint. This could expose the 135.00 psychological support handle once more. However, a triangle resistance breakout and confirmation candle close could invalidate any downside move and leave the door open for another run up to 140.00 and beyond.