USD/JPY Insights: Economic Drivers and Technical Analysis

• Fundamental analysis for Japanese yen and U.S. dollars

-Japanese Inflation, BOJ Rate Hikes

-Fed Chair Powell's Speech

• Technical analysis for USDJPY pair

-Identifying Key Levels, Current Trends, and Trend Shifts for USD/JPY Movement

Fundamental Analysis

This morning, Friday, August 23, Japan’s core Consumer Price Index (CPI) showed a positive reading, increasing by 0.1% from the previous reading, bringing Japan's annual core inflation rate to 2.7%. Meanwhile, Japanese markets are closely watching the testimony of Bank of Japan Governor Kazuo Ueda to the Congress regarding interest rate hikes. Ueda mentioned that the Bank of Japan will continue to raise interest rates if economic data align with expectations. This news is seen as positive for the Japanese yen and is reflected in its movements.

Regarding the U.S. dollar, markets are awaiting today’s speech by Federal Reserve Chair Jerome Powell and what he will mention about the next steps concerning interest rate cuts. Key aspects to watch during his speech include the number of rate cuts expected this year and whether the reduction will be 50 basis points or less.

Technical Analysis

Figure 1: USDJPY, H4, TradingView

The USD/JPY pair is trading in a generally downward direction, forming lower lows. The closest target for this pair is the level of 143.319. If the price rises above 150.890, this move would be considered a reversal, indicating a potential shift from a downward to an upward trend. Conversely, breaking below 141.678 would suggest further decline for the pair and a continuation of the downward trend, as per analyst analysis.