Weekly Technical Outlook: USD/JPY
Original analysis by ActionForex.com
(Adaptation and expansion for educational purposes)
Overview
The USD/JPY currency pair showed notable strength during the past week, experiencing a steady upward trend. Aided by the divergence in monetary policy between the Federal Reserve and the Bank of Japan, the dollar continued to gain ground against the yen. While economic fundamentals still play a central role, technical indicators are currently favoring continued bullish momentum for the pair. Nonetheless, profit-taking and intervention risks from Japanese authorities remain key factors that could trigger short-term volatility.
Weekly Performance Summary
– USD/JPY ended the week with moderate gains.
– The pair tested resistance near the 156.00 level but failed to close decisively above it.
– Mixed macroeconomic data from the United States added temporary fluctuations.
– Market speculation of BoJ’s potential intervention kept traders cautious near key psychological levels.
Technical Analysis
Trend and Price Movement
– USD/JPY continued trading within a broad upward trend channel extending back several months.
– Recent action has been characterized by short-term consolidations followed by upward breakouts, indicating strong buying interest on dips.
– The weekly close just below 156.00 suggests a significant resistance level that will require increased bullish momentum to breach sustainably.
Support and Resistance Levels
Key resistance levels in focus:
– 156.28: The immediate upside target and a key horizontal resistance. A break above this level may signal further bullish extension.
– 158.19: Projected long-term resistance based on a 61.8% Fibonacci projection of the advance from the 146.47 to 151.86 leg, later measured against the 150.80 retracement.
Key support levels below current price:
– 151.86: Minor resistance from previous consolidation and now a potential support floor.
– 150.80: A former breakout zone that may serve as a strong near-term support level.
– 146.47: Medium-term support representing the source of a previous bounce.
Moving Averages
– Daily 50-period moving average is trending upward, indicating medium-term bullish sentiment.
– Price is consistently trading above both 50-day and 100-day moving averages.
– No significant divergence is present between the short- and long-term averages, further confirming the continuation bias in favor of buyers.
Momentum Indicators
– RSI (Relative Strength Index) remains above 60 on the daily chart, indicating bullish momentum.
– Weekly RSI edges closer to overbought territory around 70, suggesting traders should be alert to potential reversal signals.
– MACD (Moving Average Convergence Divergence) continues to stay in bullish territory, with no sign of a bearish crossover on the weekly chart, preserving upside risk.
Chart Structure and Pattern Development
– The price appears to be forming a continuation pattern within a longer-term bullish channel on the weekly chart.
– No reversal patterns such as head and shoulders or double tops are evident at current levels.
– Minor consolidation between 154.50 and 156.00 likely reflects market indecision pending further macroeconomic developments.
Elliott Wave Implications
The Elliott Wave structure seems to be progressing within the context of wave (iii) of an impulse structure starting from the 146.47 low:
– Wave (i): Extended from 146.47 to 151.86.
– Wave (ii): Minor correction back to 150.80.
– Wave (iii): Currently unfolding, aiming toward potential target at 158.19.
– Wave (iv) and Wave (v): Yet to emerge, but may see bearish retracement once wave (iii) completes.
From this perspective, the medium-term outlook remains bullish as long as the 150.80 level holds.
Fundamental Considerations
While this is a technical outlook, fundamental drivers heavily influence USD/JPY movements, especially due to divergent policies between the U.S. Federal Reserve and the Bank of Japan.
US Economic Factors:
– Recent CPI data shows persistent
Explore this further here: USD/JPY trading.