The USDJPY currency pair, also known as the Gopher, was slightly higher during the Monday morning trading session as the Bank of Japan (BoJ) interest rate decision bets continued to weigh on the Japanese Yen. The BoJ Governor Kauo Ueda’s reiteration of the need to keep the 10-year ultra-loose monetary policy continues to weigh on the currency ahead of the BoJ’s interest rate decision and quarterly outlook report on Friday.
The greenback has also opened the last week of April on a firmer footing as the bets that the Fed would continue its monetary policy tightening path intensified ahead of the FOMC meeting next week. The CME Fedwatch Tool reports that the market is pricing in an 86.6% chance of a 25-basis point rate hike in May, slightly up from 85.2% a week ago.
Technical
The 4H chart shows that the Gopher bulls have regained control following the bears’ failure to push below the psychological level at 133.827, around the 50.00% Fibonacci retracement level drawn from the 7th of March 2023 high of 137.941 to the 24th of March 2023 low of 129.684.
The 61.80% Fibonacci retracement level acts as an immediate resistance to the bulls’ rally. A sustained move through the 61.80% Fibonacci retracement level would signal a potential bullish session for the Gopher, bringing the the135.148 resistance level into play. However, Fed chatter and increased rate bets would need to accompany the bulls’ rally if the bulls look to test the 135.941 resistance level.
However, should the bulls fail to maintain their short-term dominance, the bears would hope the push below the 133.827 support level and, potentially, a break below the ascending wedge as the sign of a bearish session for the Gopher. A sustained break below 133.827 would bring the 132.885 and 131.950 support levels into play.
Summary
The Gopher’s short-term trading has been primarily driven by the currency pair’s looming interest rate differential and should the Fed’s rate hike bets intensify. A short-term trading opportunity could exist as the bulls sustainably push the price action above the 61.80% Fibonacci retracement level. A failure to sustain a move above the golden ratio would leave the 133.813 support level in play.
Sources: TradingView, Reuters, Trading Economics.
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