At the beginning of the European market on Friday (February 7th), the USD/JPY stabilized and rebounded slightly. Behind this trend, some cautious remarks from the International Monetary Fund (IMF) have become the focus of market attention. However, the expectation of the Bank of Japan continuing to tighten monetary policy has provided some degree of support for the yen.

The monetary policy direction of the Bank of Japan

Recently, statements from officials of the Bank of Japan have further clarified the bank's stance on continuing to implement monetary tightening policies. On Thursday, a senior official from the Bank of Japan stated that the bank will steadily push for an increase in borrowing costs. This statement implies that the pace of interest rate hikes by the Bank of Japan may gradually expand, thereby narrowing the interest rate gap between the Bank of Japan and other major central banks. Especially as the Federal Reserve continues to implement tightening policies and may continue to raise interest rates, the advantage of the yen's interest rate spread has weakened. However, due to the market's general belief that the Bank of Japan's interest rate hike policy will continue, the downward space for the yen is somewhat limited.

The trend of the US dollar and market sentiment

Despite the recent weakness of the US dollar, its impact on the US dollar/Japanese yen exchange rate is limited. The market is generally waiting for the upcoming release of US non farm payroll data (NFP). The release of this economic data will have a significant impact on the short-term trend of the US dollar, therefore, market sentiment is showing a certain wait-and-see trend.

Technical analyst interpretation:

From a technical perspective, the US dollar/Japanese yen has shown a relatively clear downward trend this week. The price fell below the support range of 152.50-152.45, which was originally composed of 100 day and 200 day moving averages and was a strong support level. Breaking through this critical support level has become a key signal for the market to be bearish on the USD/JPY.

According to the current technical chart, the downward trend of USD/JPY is still ongoing. The oscillation indicator on the daily chart is still in the negative range, indicating that downward pressure still exists.

Support and Resistance Levels

On a technical level, 151.00 currently serves as a direct support level for the US dollar/Japanese yen. If the price falls below this support and stabilizes below it, the USD/JPY may further decline and move towards the support range of 150.55-150.50. If this support zone is also breached, the exchange rate will face greater downward pressure, and the target may point to the psychological level of 150.00. If the exchange rate further declines, it may test the support at the 149.60 level and even touch the 149.00 level, which is the low point in December.

Although the overall downward trend currently dominates, if the US dollar/Japanese yen rebounds, its upward potential may be constrained by the 153.00 region. The 152.50-152.45 area was originally a support level, but once the price rebounds to around this level, it will transform into a new resistance level. If the price breaks through this level, it may further advance towards around 153.00.

Comprehensive analysis and outlook

Overall, the trend of USD/JPY is influenced by two main factors: the tightening monetary policy of the Bank of Japan and market expectations for the Federal Reserve's policies. Although the strength of US economic data may support the US dollar, the downward potential of the Japanese yen is still supported by expectations of interest rate hikes from the Bank of Japan, resulting in significant volatility in the USD/JPY exchange rate. From a technical perspective, after breaking through the key support level of 152.50-152.45, there is still downward potential for the US dollar/Japanese yen in the short term.