Original Author: ActionForex.com
Technical Outlook: USD/JPY Mid-Day Analysis
As of mid-day trading session, USD/JPY is maintaining a strong short-term uptrend, staying within a rising channel formation that has been evident over the past several weeks. The pair currently exhibits firm bullish momentum, holding comfortably above the 155.00 psychological level and moving steadily toward recent multi-decade highs. The overall structure emphasizes increasing demand in the U.S. dollar relative to the Japanese yen, reinforced by divergent monetary policies between the Federal Reserve and the Bank of Japan.
Intraday Analysis and Market Behavior:
– The USD/JPY is trading above both the 20-period and 50-period moving averages on the 4-hour and daily charts, suggesting bullish continuation.
– Immediate resistance lies near the 158.20 and 158.50 levels. Surpassing these levels may initiate a test of the 160.00 threshold, which can act as a psychological barrier.
– On the downside, 156.70 serves as initial support, followed by stronger structural support near 155.00. A breach below the latter would signal waning bullish momentum but not necessarily a bearish reversal.
Trend Structure and Technical Indicators:
– The Relative Strength Index (RSI) has entered the overbought territory above the 70 level on shorter timeframes. While this suggests that a short-term pullback is plausible, overbought conditions in strong trends often sustain for extended periods.
– Moving Average Convergence Divergence (MACD) continues to print in positive territory, providing confirmation to the prevailing upward bias. The histogram remains above the zero line, signifying sustained buying pressure.
– Price action adheres well to a defined ascending channel with repeated successful rebounds from the lower trend line. This reinforces the bullish structure with price respecting the technical boundaries.
Key Technical Levels:
Resistance:
– 158.20: Recent local high that corresponds with minor intraday price rejection.
– 158.50: Former resistance zone; if broken, could pave the way towards testing 160.00.
– 160.00: Long-term resistance with psychological and technical significance; market reaction here could be pivotal.
Support:
– 156.70: Immediate intraday support and short-term pivot level.
– 155.00: Key horizontal support and former breakout zone.
– 154.00: Channel support and also coincides with the 20-day EMA.
– 151.90: Longer-term support aligning with the base of a sustained breakout area.
Medium-Term Outlook:
– The bias remains clearly tilted to the upside in the medium term, with higher highs and higher lows printing consistently over the last few weeks.
– As long as USD/JPY trades above the 155.00 level, the focus stays on potential bullish extensions. Sustained breaks above 158.50 could open up toward the 160.00 barrier.
– Violation of the 155.00 support and a move below 154.00 could signal consolidation or the beginning of a deeper retracement. However, bullish validity would only be questioned if price decisively closes below 151.90.
Macro Influence and Sentiment Drivers:
The U.S. dollar’s strength against the Japanese yen can be attributed to the stark divergence in monetary policy outlook between the Federal Reserve and the Bank of Japan:
Federal Reserve (Fed) Outlook:
– The Fed continues to stress its data-dependent stance but remains inclined to maintain higher interest rates for an extended period, given persistent inflationary pressures.
– Recent U.S. economic data, including resilient labor market figures and sticky inflation, have helped push Treasury yields higher, supporting the dollar.
– Market participants now have reduced expectations for Fed rate cuts in 2024, and this repricing of expectations has contributed to dollar strength.
Bank of Japan (BoJ) Policy Direction:
– In contrast, the Bank of Japan remains broadly dovish despite shifting away from ultra-loose monetary policy. The central bank continues to maintain low
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