Title: USD/JPY Retreats After Failed Breakout Attempt
Original article by: ActionForex.com Contributor
In the recent Forex landscape, the USD/JPY currency pair has witnessed renewed selling pressure, retreating from prior bullish attempts. After failing to maintain momentum above key resistance levels, the pair has now returned to earlier support zones, essentially taking it “back to square one.”
This piece provides a detailed technical analysis of the USD/JPY’s recent price action and future outlook, based on the latest updates by ActionForex.com’s technical analysis contributor. Through examination of support and resistance levels, trendlines, and momentum indicators, we detail why the pair faltered and what could lie ahead for traders.
Overview of Recent Price Action
– The USD/JPY attempted a breakout above the 155.00 level but failed to sustain the rise.
– Price action reversed after testing the 155.00 resistance zone, which aligns with previous swing highs.
– The rally lost momentum amid renewed strength in the Japanese yen alongside declining U.S. Treasury yields.
– The pair has now pulled back to a confluence of support levels near the 152.00 area.
Technical Breakdown
Resistance Levels and Failed Breakout
– The 155.00 level served as major resistance and a psychological barrier, having previously rejected bullish attempts.
– A breakout was initially backed by optimism around Fed policy remaining relatively hawkish in tone. However, that optimism appears to have faded.
– Price briefly pushed above the 155.00 mark but lacked conviction. This was confirmed by short-lived candles on the daily chart that failed to close above resistance.
– Bearish momentum quickly reemerged, driving the pair lower and negating any signs of a sustained breakout.
Support Levels and Current Price Structure
– The 152.00 zone emerges as a critical near-term support level, marked by:
– Previous swing lows
– A horizontal level of interest dating back to earlier consolidations in February and March
– Proximity to key moving averages, notably the daily 50-period EMA
– Price action shows a lack of strong reaction to this support for now, suggesting indecision among bulls.
Trendlines and Structural Shifts
– Upward trendlines from March to mid-April have now been broken to the downside, reinforcing bearish sentiment.
– Breaks below those ascending trendlines typically signal a weakening bullish trend and a warning for continued retracement.
– The failure to uphold a sustained higher high/higher low structure adds to the bearish short-term bias.
Momentum Indicators and Oscillators
– The Relative Strength Index (RSI) on the daily chart has fallen from overbought territory and is now hovering near the neutral 50 mark.
– This signals weakening bullish momentum and growing downside pressure.
– The Moving Average Convergence Divergence (MACD) histogram has crossed below the signal line, reinforcing the downturn.
– Both indicators support the notion that momentum has shifted in favor of bears for the short to medium term.
Fundamental Context and Macro Drivers
The recent shift in USD/JPY price action was not solely influenced by technical forces but also by changing macroeconomic dynamics.
Shifts in U.S. Monetary Policy Expectations
– U.S. inflation data and labor market figures have failed to meet aggressive expectations, softening the hawkish narrative around the Federal Reserve.
– Although the Fed has remained non-committal about specific rate cuts, market participants are beginning to price in more dovish outcomes.
– This loss of rate hike momentum has placed downward pressure on the U.S. dollar, contributing to the decline in USD/JPY.
Japanese Yen Resilience and Intervention Concerns
– The Japanese yen has shown signs of strength, partly due to speculation of potential intervention by the Bank of Japan to curb excessive currency weakness.
– Reports of government officials monitoring currency developments closely have added to volatility in the pair.
– While no direct intervention has occurred, the psychological impact on traders is significant, especially when the USD/JPY
Read more on EUR/USD trading.