The USD/JPY currency pair experienced a rebound this week, testing resistance levels amidst a backdrop of favorable US consumer sentiment and personal spending data. The pair hit a new low at 149.47 before recovering to 149.77, marking a positive start to the week.
The pair is currently testing resistance levels, with the previous high of 149.81 forming a significant obstacle. The H1 chart indicates strong demand around the former low of 149.32 and a rebound upwards. However, escaping from the Rising Wedge suggests a possible larger downside movement. While breakouts above the former high could signal potential sell-offs, closing above 149.81 may spur growth toward the uptrend line.
On the other hand, bearish closure below 149.32 could indicate a larger downside movement and present a good selling opportunity after retesting broken support levels. These movements come in light of anticipated steady Bank of Japan (BOJ) monetary policy and upcoming economic data releases from both Japan and the US, which could significantly influence the pair's volatility.
Earlier this week, the USD/JPY pair saw the dip-buying activity as it bounced back from prior losses due to diverging policies between the BOJ and Federal Reserve (Fed) around yield curve control (YCC). The BOJ is expected to maintain negative rates, contrasting with hawkish expectations for the Fed, providing support for USD/JPY.
The US Dollar has been buoyed by high Treasury bond yields and rapid US economic growth, marked as the fastest in nearly two years. This growth has been accompanied by increased consumer spending in September and an elevated monthly inflation print.
Despite these robust indicators, investors anticipate a status quo from the Fed's forthcoming two-day policy meeting. Potential forex market interventions by Japanese authorities to counter Yen depreciation and impending central bank event risks may restrict additional USD/JPY gains. However, the fundamental backdrop currently favors bullish traders.
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