Title: USD/JPY Forecast – Directional Momentum Builds as Key Levels Are Tested
Original Article by: Christopher Lewis (DailyForex.com)
Adapted and Elaborated Version by: [Your Name]
The USD/JPY currency pair has recently demonstrated an assertive movement within an established broader trend. This bullish trend has been driven by persistent macroeconomic forces, central bank stances, and investor sentiment indicating confidence in the U.S. dollar relative to the Japanese yen. As of early August 2025, this momentum shows signs of potential continuation, as traders begin assessing critical price levels and fundamental implications influencing the pair.
In this expanded breakdown of Christopher Lewis’s insightful analysis originally published on DailyForex.com, we take a closer look at the key technical signals underpinning the current USD/JPY trend while framing the outlook with auxiliary factors. By integrating central bank dynamics, price actions, and market psychology, traders can prepare for what lies ahead in the USD/JPY pair.
USD/JPY: Technical Overview
The pair has been in a well-defined uptrend, supported by both technical and fundamental elements. As of August 1, 2025, the price of USD/JPY is hovering near the 158.50 area, with traders watching for either further bullish continuation or signs of exhaustion near resistance regions.
Key Technical Highlights:
– The 157.50 level has emerged as a short-term support zone, reinforcing market structure.
– Resistance is forming near the 159.50 area, with further upside potential if bulls can push above and maintain momentum.
– The overall trend remains bullish as long as price action holds above 155.00.
Daily candlestick formations continue to reinforce upward movement, particularly given the recent retest and bounce off support zones, suggesting that buyers remain in control. If price breaches 159.50 decisively, a run toward the psychological level of 160.00 becomes increasingly likely.
Wave Structure and Momentum Indications
From a price structure perspective, the market remains in an impulsive move, potentially in a third upward wave extension phase within broader Elliott Wave analysis. This extended move, backed by momentum oscillators such as RSI and MACD, supports the case for sustained strength unless major reversal signals emerge.
Key Momentum Indicators:
– Relative Strength Index (RSI) remains elevated but not overbought, hovering just below 70.
– MACD continues to print bullish signals, with the histogram showing growing divergence in favor of buying volume.
– Moving averages (50-day and 200-day) are both trending upward with a healthy gap, indicating strong medium-term bullish commitment.
Fundamental Drivers Supporting the USD/JPY Rally
While technicals remain vital, fundamentals have provided an equally formidable tailwind behind the USD/JPY rise. Several macroeconomic themes are contributing to the yen’s weakness and dollar’s strength:
1. Fed’s Hawkish Posturing:
– Persistently high inflation in the U.S. has kept the Federal Reserve in a hawkish stance.
– Short-term interest rates remain elevated, and the Fed has shown reluctance to pivot toward easing until inflation targets are consistently met.
– Real yield differentials between U.S. and Japanese bonds provide incentive for investors to favor dollar-denominated assets.
2. Bank of Japan’s Dovish Continuity:
– Despite hints of normalization, the Bank of Japan (BoJ) continues to maintain ultra-loose monetary policy.
– Yield curve control policies remain in play, preventing long-term rates from rising meaningfully in Japan.
3. Carry Trade Dynamics:
– With rates still at historical lows in Japan and significantly higher in the U.S., carry trades (where investors borrow yen to invest in higher-yielding currencies) continue to dominate.
– This capital flow dynamic directly weakens the yen and reinforces USD/JPY strength.
4. Global Uncertainty & Safe-Haven Bias:
– While the yen is traditionally considered a safe-haven currency, recent geopolitical and financial turbulence have
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