Title: USD/JPY Pauses But Holds Positive Bias: Outlook Remains Bullish
Original Author: EconoTimes FX Analysts
Link to Original Article: [EconoTimes – FxWirePro: USD/JPY runs out of steam but maintains bullish outlook](http://www.econotimes.com/FxWirePro-USD-JPY-runs-out-of-steam-but-maintains-bullish-outlook-1719219)
The USD/JPY currency pair recently hit resistance levels but continues to maintain its bullish bias amid underlying strength in the US dollar. Although the bullish run momentarily stalled, technical indicators, central bank expectations, and macroeconomic support suggest the uptrend is far from over. Here is an in-depth analysis of the USD/JPY pair, highlighting both technical setup and fundamental drivers.
Overview:
– USD/JPY has gained substantially in recent sessions, reflecting the strength of the US dollar and relatively weaker Japanese yen.
– Despite facing temporary resistance near multi-month highs, the pair remains in an upward trajectory.
– Expectations of divergence in monetary policy between the US Federal Reserve and the Bank of Japan (BoJ) continue to influence price action.
– Market participants are closely eyeing economic data and central bank commentary for cues on the next move.
Technical Analysis:
– The USD/JPY touched highs around 151.90 before pulling back slightly.
– The pair is trading well above key moving averages, indicating strong underlying momentum.
– Support levels lie near 150.80 and 150.00, while resistance is seen around 152.00.
– The Relative Strength Index (RSI) is hovering near overbought levels but has not shown a clear sign of reversal.
– MACD continues to reflect bullish momentum with the signal line still trending upwards.
Key Technical Criteria:
– Uptrend Channel: The pair remains comfortably within its ascending channel, which began forming from lows near 127.00 earlier this year.
– Moving Averages:
– 21-day EMA: Positioned around 150.30, offering dynamic support.
– 50-day EMA: At approximately 149.20, reinforcing near-term bullish sentiment.
– 200-day EMA: Located near 143.50, confirming the longer-term uptrend.
– Fib Levels: The 78.6 percent Fibonacci retracement from recent swings supports the current consolidation phase.
– Momentum Oscillators:
– RSI near 70 suggests an overbought condition but not a definitive reversal.
– Stochastic Oscillators show the possibility of continued bullish movement.
– Chart Patterns: No clear reversal patterns have formed, indicating traders are still favoring long positions.
Fundamental Drivers:
US Dollar Strength:
– The US dollar has been supported by hawkish commentary from the Federal Reserve, as inflation remains above the 2 percent target.
– Markets have priced in the likelihood of fewer rate cuts this year than previously expected.
– Strong US economic data, including firm labor market statistics and robust consumer spending, continues to support the dollar.
– A flight to safety during times of global risk aversion also benefits the USD, acting as a global reserve currency.
Federal Reserve Policy Outlook:
– Fed officials have reiterated their intent to maintain higher interest rates for longer if inflation pressures persist.
– Market expectations have adjusted to reflect the likelihood that any future rate cuts may be pushed into 2025, providing long-term support for the dollar.
– Real yield spread between US and Japanese government bonds has widened significantly, favoring the greenback.
Bank of Japan’s Cautious Stance:
– The BoJ continues to maintain an ultra-loose monetary policy, despite having exited its negative rate environment earlier this year.
– Governor Kazuo Ueda has indicated that monetary stimulus will remain until inflation stays sustainably above 2 percent.
– Wage growth and inflation metrics in Japan have not justified tightening on a large scale.
– As a result, the BoJ stands as a clear outlier among developed nations’ central banks, which
Explore this further here: USD/JPY trading.