USD/JPY to Target 145 as the Yen Flounders Around the Hawkish Fed

It was a quiet start to the Asian session for the USD/JPY pair, with no economic indicators from Japan for the markets to consider this morning.

The lack of stats left the USD/JPY in the hands of market sentiment towards the Fed and the economic outlook. Monetary policy divergence remains heavily in favor of the greenback, supporting a continued USD/JPY move towards ¥145.

Until US labor market conditions deteriorate or the Bank of Japan shifts its stance on monetary policy, pressure on the Yen will likely persist.

Later today, US economic indicators will provide direction. US jobless claims and Q2 GDP numbers will draw interest. However, barring any revisions to the GDP numbers, the jobless claims will be the focal point. A fall in initial jobless claims to sub-200k would drive demand for the dollar.

Talk of a Bank of Japan intervention lingers, though doubts remain over the effectiveness of a BoJ move.

USD/JPY Price Action

This morning, the Dollar/Yen was up 0.10% to 144.259. A mixed start to the day saw the Dollar/Yen fall to an early low of 144.046 before rising to a high of 144.466

Technical Indicators

The Dollar/Yen needs to move through the 144.297 pivot to target the First Major Resistance Level (R1) at 144.69 and the Wednesday high of 144.869. Hawkish FOMC member chatter and upbeat jobless claims would support a breakout from 144.50.

In the case of a breakout session, the Dollar/Yen would likely test resistance at 145 and the Second Major Resistance Level (R2) at 145.262.

The Third Major Resistance Level (R3) sits at 146.227.

Failure to move through the pivot would leave the First Major Support Level (S1) at 143.725 in play. However, barring a dollar meltdown, the Dollar/Yen would likely avoid sub-143.500 and the Second Major Support Level (S2) at 143.332.

The Third Major Support Level (S3) sits at 142.367.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The Dollar/Yen sits above the 50-day EMA, currently at 143.807. The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A Dollar/Yen hold above the 50-day EMA (143.807) would support a breakout from R1 (144.690) to target 145 and R2 (145.262). However, a fall through the 50-day EMA and S1 (143.725) would give the bears a look at S2 (143.332). The 200-day EMA sits at 141.080.