Title: USD/JPY Analysis: Bearish Momentum Signals Potential for Further Downside
Original author: Matías Salord, FXStreet
Link to original article: [USD/JPY: Downside momentum and potential for further drop](https://www.fxstreet.com/analysis/usd-jpy-downside-momentum-and-potential-for-there-further-drop-video-202508110814)
The USD/JPY currency pair has recently entered a bearish phase following a period of upward consolidation. This shift in momentum signals possible downside potential in the coming sessions, particularly as technical indicators and broader macroeconomic influences weigh on price action.
Matías Salord of FXStreet presents a technically focused outlook on the USD/JPY pair, highlighting changing dynamics, key support and resistance zones, and expectations for near-term movement. This extended review explores the analysis provided, adding more context to the technical patterns, fundamental drivers, and implications for traders with detailed breakdowns.
Current Technical Overview
The price structure of USD/JPY has turned negative over the last several trading sessions. After peaking at recent highs near 145.00, the pair showed signs of fatigue and eventually dropped below critical support levels, triggering a shift in sentiment.
Key technical observations:
– The pair formed a triple-top pattern near the 145.00 resistance zone, showing price exhaustion.
– The retracement below support at 143.00 added downward pressure.
– The bearish crossover on shorter moving averages, such as the 20-period crossing below the 50-period moving average on the 4-hour chart, confirms short-term downside risk.
– The Relative Strength Index (RSI) slipped into bear territory, reflecting growing selling pressure.
– MACD has shifted into negative territory, reinforcing the bear case.
Support and Resistance Levels
For traders monitoring key technical zones, the following areas are critical at this stage:
Support:
– 141.65 – A horizontal level that provided support during early August and once again emerged in recent sessions as buyers placed bids.
– 141.00 – A psychological round number that also served as previous resistance earlier in the year, now functioning as support.
– 140.30 – The next logical target for bearish continuation, where prior accumulation zones exist.
Resistance:
– 143.00 – This was a significant former support region that now acts as a resistance level.
– 144.50 – A secondary resistance point ahead of the primary ceiling near 145.00.
– 145.00 – A multi-session high where heavy selling pressure reappeared during recent attempts to break higher.
If USD/JPY fails to reclaim 143.00 in the coming trading sessions, it will confirm a bearish short-to-medium-term trend. Technical momentum indicators align with the view that bulls are retreating, and sellers continue to gain control over price action.
Fundamental Backdrop
To understand USD/JPY dynamics, it’s important to consider the macroeconomic environment. The combination of Federal Reserve monetary policy, Bank of Japan’s intervention stance, and broad global risk sentiment significantly impacts the pair.
Key Fundamental Drivers:
1. Federal Reserve Rate Policy:
– Although the Fed has shifted to a more data-dependent policy after aggressive rate hikes, stubbornly high inflation has kept bets of another hike on the table.
– U.S. Treasury yields, particularly the 10-year note, are closely followed by USD/JPY as bond yields and rate expectations remain primary USD drivers.
2. Japanese Monetary Policy:
– The Bank of Japan (BoJ) has maintained ultra-loose policy, keeping interest rates in negative territory.
– Occasional signals of potential policy normalization have been undermined by weak Japanese inflation and growth figures.
– However, any surprise shift from the BoJ could see USD/JPY react with sharp downside moves.
3. Intervention Risk:
– Japan’s Ministry of Finance has previously intervened in the foreign exchange market to stem yen weakness.
– A weakening yen beyond critical levels (e.g., beyond
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