USDJPY Could Be Bottoming Out, Eyeing a Bullish Rebound

Summary:

This price action is often viewed as a bullish signal, particularly when the recovery retraces at least 75% of the prior candle’s body.

BUY USDJPY

Close Time

CLOSED

147.898

Entry Price

154.200

144.300

158.749 -0.690 -0.43%

52.1

Pips

Profit

144.300

148.419

Exit Price

147.898

Entry Price

154.200

The latest Job Openings and Labor Turnover Survey (JOLTS) from the U.S. Bureau of Labor Statistics (BLS) showed that job openings reached 7.74 million at the end of January, exceeding analyst projections of 7.63 million. This figure also represents an increase from the revised December reading of 7.508 million.

According to the report: "Hires remained at 5.4 million, while total separations held steady at 5.3 million. Within separations, quits (3.3 million) and layoffs and discharges (1.6 million) showed minimal changes."

Trade negotiations between the United States and Canada remain a key focus as tensions between the two nations continue to escalate. Ontario Premier Doug Ford has decided to suspend planned tariffs on electricity exports following urgent discussions with U.S. officials. This move comes in response to U.S. President Donald Trump’s recent threat to impose a 50% tariff on Canadian steel and aluminum, further straining trade relations.

Meanwhile, market participants are closely monitoring upcoming U.S. inflation data, which is expected to play a crucial role in shaping expectations for Federal Reserve policy. A hotter-than-expected Consumer Price Index (CPI) reading could reinforce the case for maintaining higher interest rates for an extended period.

The CME FedWatch Tool currently assigns a 95.0% probability that the Federal Reserve will keep interest rates unchanged at its March 19 meeting. However, the likelihood of a rate cut at the May 7 meeting has risen to 47.8%, with market expectations for a reduction reaching 89.9% by June.

Across the Pacific, the Bank of Japan (BoJ) is widely expected to leave interest rates unchanged on March 19, prioritizing financial stability and avoiding premature tightening that could dampen domestic spending. The central bank is likely to begin raising rates gradually in the second quarter of 2025, aiming to balance inflation risks without jeopardizing economic growth.

Japan's economy expanded at an annualized rate of 2.2% in Q4, primarily driven by export performance, while domestic demand remained sluggish. However, January data painted a more cautious picture: industrial production contracted by 1.1% month-over-month, the PMI remained below 50, and real wages declined by 1.8% year-over-year, limiting consumer spending. Meanwhile, core inflation—excluding food and energy—stood at 2.5% year-over-year, remaining above the BoJ’s target since July. USDJPY Could Be Bottoming Out, Eyeing a Bullish Rebound_1

USDJPY Could Be Bottoming Out, Eyeing a Bullish Rebound_1

Technical Analysis

USD/JPY recently tested a local low at 146.64, where it found strong support and printed a bullish daily candle that nearly engulfed the previous bearish session. This price action is often viewed as a bullish signal, particularly when the recovery retraces at least 75% of the prior candle’s body.

With the Bank of Japan recently adopting a more cautious stance on rate hikes, the bearish sentiment surrounding the yen could persist, paving the way for a renewed upside move in USD/JPY. From the current support zone, the pair could stage a rally toward the 154.21 level.

Momentum indicators also suggest a potential rebound. The Relative Strength Index (RSI) briefly approached oversold conditions, reaching 31 when USD/JPY hit its recent low. This could attract buyers, reinforcing a move toward the next key resistance at 154.20—a level that aligns with the 61.8% Fibonacci retracement, making it a strong bullish target.

However, if the current support fails to hold, the bearish scenario could unfold, with USD/JPY potentially declining toward the 139.70 level—the low recorded on September 16 of last year.

Trading Recommendations

Trading direction: Buy

Entry price: 147.89

Target price: 154.20

Stop loss: 144.30

Validity: Mar 21, 2025 15:00:00

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USDJPY Could Be Bottoming Out, Eyeing a Bullish Rebound

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