The USD/JPY pair saw renewed buying interest for the second consecutive day on Tuesday, trading in the mid-143.00s during the early European session. Despite this upward movement, the pair lacks strong bullish momentum and remains below the recent peak as traders adopt a cautious stance ahead of significant US inflation data later this week.
The Japanese Yen (JPY) continues to be pressured by a downward revision of the second-quarter Gross Domestic Product (GDP) figures, which has bolstered the USD/JPY pair. This is compounded by a modest uptick in the US Dollar (USD). However, contrasting policy expectations between the Federal Reserve (Fed) and the Bank of Japan (BoJ) are tempering investor enthusiasm, limiting the pair’s potential upside.
From a technical standpoint, the USD/JPY pair has been trending downward within a descending channel over the past four weeks. This pattern suggests a well-established short-term downtrend, indicating potential for additional selling at higher levels. The bearish outlook is further supported by oscillators on the daily chart, which remain firmly in negative territory and have not yet approached the oversold zone.
In light of this, any upward movement in the USD/JPY pair might be viewed as a selling opportunity, with resistance expected around the 144.00 level. However, if follow-through buying occurs, it could spark a short-covering rally, pushing the pair towards the next resistance at 144.55. Should momentum continue, the pair could test the 145.00 psychological level and possibly extend towards the 145.60 resistance zone.
On the downside, the immediate support is likely to hold around 143.20, with further protection near 143.00 and the Asian session low around 142.85. A break below these support levels could reinforce the negative bias and expose the pair to further declines towards the 142.00 round figure and potentially revisit the seven-month low of 141.70-141.65 recorded in August.
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