USD/JPY to eye 200-Day SMA on break above January high

USD/JPY Outlook

USD/JPY is on the cusp of testing the January high (134.78) as it extends the series of higher highs and lows from earlier this week, and the exchange rate may attempt to test the 200-Day SMA (136.88) if it pushes above the opening range for 2023.

USD/JPY to eye 200-Day SMA on break above January high

USD/JPY appears to be tracking the recent rise in longer-dated US Treasury yields as it registers a fresh monthly high (134.43), and it seems as though the upcoming shakeup at the Bank of Japan (BoJ) will do little to prop up the Japanese Yen given the Policy Board’s track record of voting unanimously to retain the Quantitative and Qualitative Easing (QQE) program with Yield Curve Control (YCC).

In turn, the BoJ led by Kazuo Ueda may stick to the status quo as the central bank ‘will not hesitate to take additional easing measures if necessary,’ and the diverging paths for monetary policy may keep USD/JPY afloat as the Federal Reserve prepares US households and businesses for a more restrictive policy.

FOREX.com Economic Calendar

Looking ahead, the minutes from the Fed’s February meeting may heighten the appeal of the Greenback as Chairman Jerome Powell and Co. try to avoid past mistakes of concluding the hiking cycle prematurely, and it remains to be seen if Fed officials will project a steeper path for US interest rates as the central bank is slated to update the Summary of Economic Projections (SEP) in March.

Until then, speculation surrounding the Federal Open Market Committee (FOMC) may sway USD/JPY as the larger-than-expected rise in US Retail Sales puts pressure on the central bank to extend the hiking cycle, and it seems as though the exchange rate will no longer respond to the negative slope in the 50-Day SMA (131.99) as it trades above the moving average for the first time since November.

With that said, USD/JPY may continue to trade to fresh monthly highs as it extends the recent series of higher highs and lows, and the exchange rate may attempt to test the 200-Day SMA (136.88) if it pushes above the January high (134.78).

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Japanese Yen Price Chart – USD/JPY Daily

Chart Prepared by David Song, Strategist; USD/JPY on TradingView

• USD/JPY registers a fresh monthly high (134.47) as it continues to hold above the 50-Day SMA (131.99), with the recent series of higher highs and lows in the exchange rate raising the scope for a run at the January high (134.78).
• A move above the yearly opening range may push USD/JPY towards the 200-Day SMA (136.91), with the next area of interest coming in around the December 2022 high (138.18).
• However, failure to clear the January high (134.78) may undermine the bullish price action in USD/JPY, and lack of momentum to hold above the 132.60 (38.2% Fibonacci retracement) to 133.90 (23.6% Fibonacci retracement) region may push the exchange rate back below the 50-Day SMA (131.99), with the next area of interest coming in around 130.20 (61.8% Fibonacci expansion).

--- Written by David Song, Strategist