USD/JPY: Unexpected Twists and Winning Strategies

Analyzing the USD/JPY currency pair, we observe various dynamics in play. The Japanese Yen struggles to attract buyers following the inaction of the Bank of Japan (BoJ) on Tuesday. The prevailing "risk-on" mood in the market further reduces the appeal of the JPY, supporting instead the USD/JPY. Bets on a possible dovish pivot by the US Federal Reserve (Fed) weigh on the USD and represent an obstacle for the currency pair. From a technical perspective, the pair has overcome the formation of an expanding wedge developed over the last month, but it might need an additional impulse to break the support of the descending trend line starting from mid-November highs. Regarding the economic calendar, construction activity in the United States is today's main event. Traders are eagerly awaiting Friday's data, particularly the USPCE Price Index, for more information on the potential trajectory of the Fed's rates. A clear break above the 145.10 level could increase bullish pressure towards the levels of 146.60 and 147.35. On the downside, support levels remain at 142.25 and 141.10. The US Dollar rallied for most of Tuesday's European market session after the Bank of Japan disappointed investors with an unexpectedly dovish monetary statement. However, the pair found resistance in the 145.10 area before pulling back to the mid-range of 143.90. The Bank of Japan reiterated its ultra-loose monetary policy and suggested the possibility of further easing, as, according to Governor Ueda, the outlook on inflation remains uncertain. These comments sent the Yen tumbling against its main peers. After an expected pullback already during the weekend, the price has arrived exactly where I was waiting, and this morning I will be looking for a short entry. I wish everyone a good day of trading, greetings from Nicola.