BoJ Interest Rate Impact on USD/JPY Volatility – 22 January 2025

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As we head into Wednesday, January 22, 2025, global markets are positioned for a session that could see heightened volatility, driven by key economic data releases and central bank developments. The U.S. dollar is expected to remain in focus as traders digest the latest updates on the U.S. Leading Index and remarks from the ECB President. Additionally, API crude oil stock data may also influence risk sentiment and commodity-related currencies.

In the currency markets, the NZD/USD pair exhibited sharp movements following domestic economic updates and U.S. data releases. Meanwhile, the GBP/USD pair remained volatile as market participants evaluated mixed UK employment figures and anticipated further developments from U.S. economic reports. The USD/JPY pair fluctuated as traders factored in both U.S. and Japanese trade data.

NZD/USD

Technicals in Focus

The NZD/USD pair displayed heightened volatility, closing near the 0.5663 level. Earlier, the pair experienced a sharp dip before recovering most of its losses, reflecting market reactions to U.S. data and New Zealand’s CPI updates. On the technical front, the MACD is approaching the zero line, signaling weakening bearish momentum. The Stochastic Oscillator has rebounded from oversold levels, suggesting potential upside. The 14-day RSI remains neutral, indicating indecision among traders.

Trading Strategy: Neutral to Buy

  • Buy above 0.5660 with targets at 0.5690-0.5720 and a stop loss below 0.5630.
  • Alternatively, sell below 0.5630 with targets at 0.5600-0.5570 and stops above 0.5660.

GBP/USD

Technicals in Focus

The GBP/USD pair saw considerable fluctuations, closing near the 1.2323 level after testing both support and resistance levels. The pair’s movements were influenced by the UK claimant count change, which came in lower than expected, and anticipation of U.S. economic data. The MACD remains neutral, while the Stochastic Oscillator shows signs of a potential reversal from overbought levels. The 14-day RSI is steady, reflecting a consolidating market.

Trading Strategy: Neutral to Sell

  • Sell below 1.2300 with targets at 1.2260-1.2230 and a stop loss above 1.2340.
  • Alternatively, consider long positions above 1.2340 with targets at 1.2370-1.2400 and stops below 1.2300.

USD/JPY

Technicals in Focus

The USD/JPY pair ended the session near the 155.56 level, having recovered from intraday lows. The pair’s movements were driven by mixed U.S. economic data and Japan’s trade balance figures, which showed a smaller-than-expected deficit. On the technical side, the MACD is neutral, while the Stochastic Oscillator is near overbought territory, signaling caution. The 14-day RSI remains neutral, reflecting the pair’s current range-bound behavior.

Trading Strategy: Neutral to Sell

  • Sell below 155.30 with targets at 155.00-154.70 and a stop loss above 155.60.
  • Alternatively, buy above 155.60 with targets at 155.90-156.20 and stops below 155.30.

Market Outlook

Looking ahead, the U.S. Leading Index data will be a key focus, as it could provide insights into the health of the U.S. economy and influence the dollar’s trajectory. The ECB President’s speech is another critical event, as traders look for clues about future monetary policy adjustments. In the commodities space, API crude oil stock data may drive movements in oil-sensitive currencies such as the CAD and AUD.

Overall, markets are expected to remain highly sensitive to economic releases, with the potential for increased volatility as traders react to incoming data and central bank updates.

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