The USD/JPY price analysis shows a slightly bearish trend, with the yen holding steady after rebounding from a 38-year low. Simultaneously, the dollar made a modest recovery on Tuesday, just in time for Fed Chair Powell’s upcoming testimony. 

The yen has rebounded since last week, when it reached its lowest level in 38 years. The rebound came amid fears of intervention. At the same time, there was more pressure on the Bank of Japan to hike interest rates. The weak yen has led to an increase in import costs, which is driving inflation higher. 

The recent plunge increased bets that the BoJ would be ready to hike interest rates in July. Market participants also expect the central bank to announce plans to reduce its bond purchases. Therefore, the July meeting could benefit the yen. 

On the other hand, the greenback recovered on Tuesday as investors looked forward to more clues about the Fed’s rate cut outlook. Powell is set to speak later in the day. His last speech was slightly dovish, as he acknowledged that inflation was declining and said it would pave the way for rate cuts. 

After last week’s jobs report, there is a higher 76% chance that the Fed will lower borrowing costs in September. The economy added fewer jobs in June, and the unemployment rate rose. Investors will now watch the upcoming consumer inflation figures to see whether the downtrend in inflation is consistent. If it is, the likelihood of a cut in September will increase.

USD/JPY key events today

• Fed Chair Powell’s speech

USD/JPY technical price analysis: Price retests 30-SMA after bearish break

(Click on image to enlarge)

USD/JPY 4-hour chart

On the technical side, the USD/JPY price has broken below the 30-SMA and is currently retesting it as resistance. The break below the SMA indicated a shift in sentiment to bearish. At the same time, the RSI showed a shift to solid bearish momentum when it broke below 50. 

Therefore, if the SMA holds firm as resistance, the price will fall to make a lower low. As a result, it might break below the 160.00 support level. This would pave the way for a retest of the 158.00 support level. On the other hand, if the price goes back above the SMA, it would retest the 162. 01 resistance or continue higher.

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