The outlook for the US Dollar (USD) against the Japanese Yen (JPY) currently favors further appreciation, with the potential for an upward test of the 144.30 level. However, a broader perspective suggests that the USD is undergoing a period of consolidation. According to FX analysts Quek Ser Leang and Peter Chia at UOB Group, diminishing price volatility indicates a narrowing trading range between 142.20 and 145.30. This consolidation phase reflects a period of recalibration in the market, as investors assess the relative strengths of the two currencies amidst evolving global economic conditions.
Moderating price swings point to a tighter range of 142.20/145.30
24-HOUR VIEW: “Yesterday, our expectation was for the USD to consolidate within a range of 142.20 to 144.00. Subsequently, the USD traded between 142.36 and 143.99 before settling at 143.82, marking a 0.99% increase. The strengthening underlying momentum suggests an upward bias for the USD today, potentially leading to a test of the 144.30 resistance level. Immediate support is identified at 143.50. However, a break below 143.00 would signal a weakening of the current upward momentum and necessitate a reassessment of the short-term outlook.” This near-term forecast takes into account factors such as overnight trading patterns and the prevailing market sentiment, which appear to be leaning towards further USD gains.
1-3 WEEKS VIEW: “In our previous analysis from May 6th, when the spot rate was at 143.00, we posited that the USD had likely entered a consolidation phase. Our expectation was for the currency pair to trade within a broader range of 142.20 to 146.70 for the time being. While we maintain our overall consolidation outlook, the observed moderation in price fluctuations suggests a tightening of this range to 142.20/145.30 in the immediate weeks ahead.” This revised range reflects a more nuanced understanding of the market dynamics, taking into account recent economic data releases and central bank policy announcements that may be contributing to the reduced volatility. Market participants are closely monitoring upcoming economic indicators, such as inflation figures and employment data, which could potentially trigger a breakout from this consolidation range. Furthermore, any shifts in monetary policy stances by the Federal Reserve or the Bank of Japan could also significantly impact the USD/JPY exchange rate.
