Title: USD/JPY Technical Outlook: Yen Under Pressure Amid Dollar Resilience
Original article sourced from FXStreet via Mitrade, authored by FXStreet team. The following is a rewritten and expanded analysis.
Overview:
The USD/JPY currency pair has been showing bullish strength, trading comfortably above the 157.00 level as the US Dollar continues to find support from solid economic data and expectations of policy divergence between the Federal Reserve and the Bank of Japan (BoJ). Amid relatively subdued risk sentiment and a lack of significant intervention from Japanese authorities, the pair remains elevated with potential for further upside.
In this report, we explore the key technical and fundamental drivers influencing USD/JPY’s trajectory and outline scenarios that may unfold in the near term. The analysis covers recent price action, economic catalysts, technical indicators, resistance and support levels, and the policy stance of the US Federal Reserve and the BoJ.
Key Drivers of USD/JPY Price Action:
Several factors are contributing to the USD/JPY’s current uptrend. These can be broadly categorized into economic fundamentals, central bank divergence, and technical positioning.
1. Diverging Monetary Policy Outlooks
– US Federal Reserve: The Fed remains cautious about rate cuts due to persistent inflation levels and a resilient labor market. Even though economic growth is moderating, the data does not yet justify a rate reduction.
– Bank of Japan: In contrast, the BoJ continues to maintain its ultra-loose monetary policy. Although it ended negative rates earlier this year, the central bank has not significantly tightened policy and likely won’t do so unless inflation approaches sustainable levels.
2. US Treasury Yields Support the Dollar
– Rising US bond yields due to rate hike bets have further strengthened the Dollar.
– Investors are demanding higher returns for holding US debt, which increases demand for the Dollar and supports pairs like USD/JPY.
3. Japanese Yen Weakness
– The Yen continues to struggle due to a lack of domestic rate hikes and tepid intervention from Japanese authorities.
– Despite prior verbal warnings from Japanese policymakers, no major forex interventions have occurred recently.
4. Market Sentiment and Risk Appetite
– Risk sentiment has been largely neutral to slightly bearish, prompting flows into the US Dollar as a safe haven.
– The Japanese Yen, traditionally seen as a haven currency, has not benefited from risk-off moves due to policy stagnation.
5. Bank of Japan’s Communication Strategy
– Market participants remain skeptical that the BoJ will step in with forceful measures to slow the Yen’s slide.
– Decisions appear to be focused on gradualism, creating hesitancy among traders to aggressively short USD/JPY.
Recent Price Action:
USD/JPY has displayed consistent bullish behavior, frequently testing and pushing beyond resistance levels, suggesting strong momentum in favor of the Dollar.
– Current Price: As of latest available data, the pair trades in the 157.50–158.00 range.
– Previous Close: The pair locked in weekly gains despite corrective pullbacks.
– Price Formation: Bullish continuation patterns are forming on daily and 4-hour charts.
Technical Analysis:
From a technical standpoint, indicators are pointing toward sustained bullish momentum. Support levels are holding firm, and resistance levels are being tested with increasing frequency.
1. Moving Averages
– 50-day Simple Moving Average (SMA): Trending higher and providing dynamic support around 155.00.
– 100-day SMA: Beneath the 50-day SMA around 152.00, confirming a bullish medium-term trend.
– 200-day SMA: Long-term support sits much lower near 147.00, underscoring a large upside deviation in current prices.
2. MACD (Moving Average Convergence Divergence)
– The MACD indicator is showing positive divergence, with the MACD line above the signal line.
– This signals upward momentum, although overbought conditions could trigger short-term pullbacks.
3. RSI (Relative Strength Index)
– RSI on the daily chart remains near the overb
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