Japanese Yen Price Action Setups: USD/JPY, EUR/JPY, and GBP/JPY
Original article by James Stanley | Source: Forex.com
The Japanese yen (JPY) continues to experience notable volatility amid shifting global macroeconomic landscapes, particularly as markets adjust expectations around central bank policies. The yen’s performance relative to the US dollar (USD), euro (EUR), and British pound (GBP) presents interesting technical formations, potential reversal signals, and trend continuations that traders are closely watching.
As the forex market processes developments from the Federal Reserve, the European Central Bank (ECB), and the Bank of England (BoE), all while considering the Bank of Japan’s (BoJ) more reserved policy actions, analysts have identified significant movements and opportunities in the USD/JPY, EUR/JPY, and GBP/JPY currency pairs.
This analysis explores each of these major yen pairs, reviewing recent price action, future potential setups, and key market levels to watch.
USD/JPY Technical Analysis
The USD/JPY currency pair continues to display strength after experiencing a recent test of resistance, setting the stage for trend continuation or an eventual reversal. A strong bullish trend has defined USD/JPY for much of 2024, but questions remain about whether it will encounter sustained resistance as markets weigh Fed guidance.
Key Technical Observations:
– The pair remains in a clear bullish trend above an ascending trendline from the beginning of 2024. This structure continues to hold as a supportive base for buyers.
– Resistance was recently tested at the 158.00 psychological level, with intraday price action reacting sharply as sellers temporarily forced a retreat.
– Sellers attempted to push the pair lower but failed to achieve a significant breakdown, reinforcing structural strength on the bullish side.
– Daily RSI remains near overbought territory; however, this alone has not deterred buyers during recent bullish advances.
Chart Formations:
– Bull pennant formation spotted in recent weeks indicates consolidation within a broader uptrend, suggesting the possibility of continued upside if price breaks out above the consolidation range.
– A higher low established around the 153.00 level points toward strong demand, a continuation signal that emphasizes ongoing bullish interest.
– Near-term resistance lies at 158.00 with further psychological levels eyed at 160.00.
Directional Bias: Bullish, contingent on a confirmed break and hold above 158.00. A push through that level could open the door to further gains, targeting multi-decade highs above 160.00, last seen in the early 1990s.
However, caution must be exercised. Any dovish pivot or unexpected intervention from the BoJ could quickly alter directional bias. Additionally, heightened geopolitical tensions or macroeconomic uncertainties may increase yen demand due to its traditional role as a safe-haven currency.
EUR/JPY Technical Analysis
The euro-yen cross has demonstrated sustained strength through the first half of 2024, with the euro benefitting from relative ECB hawkishness compared to BoJ’s more dovish stance. The pair has recently marked fresh seven-year highs, and technical charts highlight a strong continuation of the bullish trend.
Key Observations:
– EUR/JPY has maintained a structure of higher highs and higher lows, a textbook bullish formation.
– The pair’s recent push above the 170.00 handle signals strong upside momentum, driven in part by euro strength and yen weakness.
– Buyers have consistently stepped in during pullbacks near trendline support, reinforcing confidence in the ongoing uptrend.
– Minimal resistance exists from historical price action above 170.00 due to the multi-year breakout, making this a key psychological and technical area to watch.
Important Technical Levels:
– Near-term support at 168.00 aligns with previous breakout levels and 50-day moving average, likely to attract dip-buying interest.
– Resistance overhead begins at 172.00 with possible extensions toward 175.00 if bullish momentum persists.
– A return below 167.00 could invalidate the bullish
Explore this further here: USD/JPY trading.