Japanese Yen (JPY) Price Action: Following Dovish BoJ Comments, What Does Price Action Tell Us?

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The Bank of Japan (BoJ) has released their summary of opinions, accompanied by some bearish comments from BoJ policymakers. BoJ Deputy Governor Shinichi Uchida softened some of Governor Ueda’s more aggressive remarks, aiding in market stabilization.

The BoJ noted that the probability of reaching the inflation target has risen, but the Central Bank also anticipates some upward pressure. The BoJ projects that inflation will hit the target by the second half of 2025. This scenario presents an intriguing question for market participants and could position the Yen strongly next year.

While central banks worldwide are cutting rates, the BoJ plans to tighten and raise rates. This could propel the Yen to the forefront of gains in 2025. Although there is a considerable journey ahead, it is something to keep in mind.

In the short term, Yen pairs remain interesting yet face downside pressure. Geopolitical concerns could bolster the Yen. However, the safe haven appeal might be divided among the US Dollar, Yen, and Swiss Franc, potentially negating Yen gains against the Dollar but benefiting it against the Euro and GBP.

Full BoJ Summary of Opinions

Technical Analysis 

USD/JPY

From a technical perspective, USD/JPY has rebounded strongly and formed an imperfect morning star candlestick pattern. Typically, such a pattern signals a bullish move, but various factors need to be considered.

From a price action viewpoint, the H4 chart has shown higher highs and higher lows since bottoming out at 141.67 on Monday, suggesting a potential return to the 150.00 level in the coming days.

What could invalidate the bullish move? An H4 candle closing below the recent lower swing high around 144.25 would invalidate the bullish outlook. This would break the current structure and could drive the Yen to retest the psychological 140.00 level.

A move higher from here faces immediate resistance at 148.00 before the 150.00 psychological level comes into focus.

USD/JPY Daily Chart, August 8, 2024

Source: TradingView (click to enlarge)

Support

• 145.00
• 144.00
• 141.65

Resistance

• 148.00
• 150.00 (psychological level)
• 150.87

GBP/JPY

GBP/JPY is mirroring the USD/JPY chart, currently trading just above the important support level at 185.00. The H4 chart shows a similar pattern to USD/JPY, with higher highs and higher lows since Monday’s dip just below the 180.00 mark. 

Bulls are in control for the moment, but a break and H4 candle close below 183.30 would invalidate the bullish structure. This could lead to a retest of recent lows and possibly a move towards the 175.00 level.

 On the upside, resistance is found at 187.65, followed by the 190.00 mark. Beyond 190.00, there’s a resistance zone around 192.00 before the descending trendline becomes relevant.

GBP/JPY Four-Hour (H4) Chart, August 8, 2024

Source: TradingView (click to enlarge)

Support

• 185.00
• 183.30
• 180.00

Resistance

• 187.65
• 190.00
• 192.00

EUR/JPY

Once again, the chart nearly mirrors USD/JPY and GBP/JPY, with the daily chart displaying an imperfect morning star candlestick pattern. This morning, EUR/JPY retested the support area around the 159.00 level before bouncing back to trade at 159.66 at the time of writing.

On the H4 timeframe, a candle close below the recent lower swing high at 157.50 would invalidate the current bullish trend, potentially leading to a retest of the recent lows around the 154.40 level. There is some support at 156.72 that would need to be breached for a retest of the recent lows to occur.

On the upside, immediate resistance lies at 160.00, followed by the 161.86 level. Beyond this, the 163.51 zone could be crucial, as it also aligns with the 200-day moving average just above.

EUR/JPY Daily Chart, August 8, 2024

Source: TradingView (click to enlarge)

Support

• 159.00
• 156.72
• 154.40

Resistance

• 160.00
• 161.85
• 163.50

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