USDJPY runs higher in early US trading. What next for the pair?

The Ueda regime has begun at the BOJ BOJ The Bank of Japan (BOJ) is the central bank of Japan. It was established in 1882 and is headquartered in Tokyo.The BOJ's main responsibilities include issuing and managing the country's currency, implementing monetary policy, and ensuring the stability of the financial system. It also acts as a lender of last resort to banks during times of financial crisis. The BOJ sets the interest rate of the country and sets an inflation target, aiming to achieve 2% inflation.The BoO has a long history, with The Bank of Japan (BOJ) is the central bank of Japan. It was established in 1882 and is headquartered in Tokyo.The BOJ's main responsibilities include issuing and managing the country's currency, implementing monetary policy, and ensuring the stability of the financial system. It also acts as a lender of last resort to banks during times of financial crisis. The BOJ sets the interest rate of the country and sets an inflation target, aiming to achieve 2% inflation.The BoO has a long history, with Read this Term, and initial comments have been mixed. In the short term, the status quo persists, resulting in a slightly bearish JPY (and a higher USDJPY USD/JPY The USD/JPY is the currency pair encompassing the dollar of the United States of America (symbol $, code USD), and the Japanese yen of Japan (symbol ¥, code JPY). The pair’s rate indicates how many Japanese yen are needed in order to purchase one US dollar. For example, when the USD/JPY is trading at 100.00, it means 1 US dollar is equivalent to 100 Japanese yen. The US dollar (USD) is the world’s most traded currency, whilst the Japanese yen is the world’s third most traded currency, resulting The USD/JPY is the currency pair encompassing the dollar of the United States of America (symbol $, code USD), and the Japanese yen of Japan (symbol ¥, code JPY). The pair’s rate indicates how many Japanese yen are needed in order to purchase one US dollar. For example, when the USD/JPY is trading at 100.00, it means 1 US dollar is equivalent to 100 Japanese yen. The US dollar (USD) is the world’s most traded currency, whilst the Japanese yen is the world’s third most traded currency, resulting Read this Term). Concurrently, the US dollar is strengthening in early US trading as markets react to Friday's employment report. Expectations for a 25 basis point hike in the May meeting have risen to 70%. US stocks are currently down, while yields have fallen today, with the two-year yield dropping three basis points but recovering from Thursday's close.

Technically, the USDJPY initially declined during the first hour of trading, testing the 100-hour moving average (blue line currently at 131.778) with a low of 131.823 (it started the day at 131.802). Buyers then stepped in, pushing the price upward. The initial uptrend during the Asia session stalled at the 38.2% Fibonacci retracement level of the decline from the March high to the March low (at 132.793). Although a subsequent downward move fully retraced the day's gains, buyers reemerged, driving the price higher over the past four hours or so. This has pushed the price above the 38.2% retracement to a high of 133.169, with last Tuesday's high at 133.161. The current trading price is 133.045.

What's next?

The 38.2% retracement level serves as a critical short-term risk level for intraday buyers. As the price initially stalled at that level and later broke higher, it has become more significant from a short-term technical perspective. It is worth noting that the recent highs may prompt some profit-taking, but the more critical technical level for buyers to breach is the falling 100-day moving average at 133.476.

Last week, the price reached the 50% Fibonacci retracement level of the March trading range at 133.769 but remained well below the falling 100-day moving average (higher blue line on the chart above). The last time the price traded above the 100-day moving average was on March 10. A move above this level would target the 50% retracement at 133.769. Overall, buyers are attempting to maintain their position above the 38.2% retracement level.