Original article by Crispus Nyaga
Source: https://menafn.com/1110331201/USDJPY-Forex-Signal-1211-Dollar-Eyes-Breakout-Video
Title: In-Depth Analysis: USD/JPY Eyes Key Breakout as Dollar Strength Gains Momentum
The USD/JPY currency pair has been trading within a relatively tight range in recent sessions, with both bulls and bears closely watching for a potential breakout. As of the latest price action, the pair seems to be consolidating around crucial resistance and support zones, which could pave the way for a significant breakout in either direction. This article explores the underlying technicals and fundamentals shaping the USD/JPY market, offering insights for traders and investors to evaluate their strategies moving forward.
Current Market Overview
The USD/JPY pair continues to hover near key resistance levels as the U.S. dollar enjoys strength across the board. Recent indicators suggest that the pair may be preparing to break towards higher ground, driven by a combination of technical patterns and fundamental catalysts. Here’s a quick snapshot of the current landscape:
– On December 11, the pair was trading around the 104.00 level.
– The U.S. dollar’s strength is being underpinned by higher demand for safe-haven assets and expectations of fiscal and monetary stimulus.
– The Japanese yen, on the other hand, has shown resilience due to renewed global uncertainty and economic caution.
Fundamental Drivers
Several fundamental factors are contributing to the ongoing momentum in the USD/JPY pair. These include macroeconomic announcements, central bank policies, and global risk sentiment.
1. US Economic Outlook:
– The U.S. economy is showing signs of recovery after a deep contraction due to the COVID-19 pandemic.
– Recent jobless claims were better-than-expected, indicating improving labor market conditions.
– Expectations for additional fiscal support from the U.S. government are boosting confidence in an accelerated economic rebound.
2. Fed Policy Stance:
– The Federal Reserve maintains an accommodative monetary policy.
– Low interest rates and ongoing asset purchases are keeping real yields low, which ordinarily puts downward pressure on the U.S. dollar.
– However, investors are now beginning to price in the possibility of rising long-term yields, which is giving some strength to the greenback.
3. Japan’s Economic Landscape:
– Weak inflation data and sluggish consumption are placing pressure on the Japanese economy.
– The Bank of Japan is expected to maintain its ultra-loose monetary policy well into 2021 or longer.
– With little room for interest rate adjustments, the yen’s strength is being driven primarily by risk-off flows.
4. Vaccine Hopes vs. Second Wave Risks:
– Optimism over COVID-19 vaccine rollouts is contributing to potential global economic recovery.
– However, increasing infections and restrictions in key economies are promoting uneven risk sentiment, which could benefit the yen as a safe-haven.
Technical Analysis
From a technical standpoint, traders are closely monitoring whether the pair can break out of its current consolidation pattern. The USD/JPY pair appears to be testing a short-term resistance zone, and the behavior around these levels could offer clues about where the market is heading next.
Key Technical Observations:
– Price Pattern:
– The pair has been forming a narrowing range over the last few trading sessions, suggesting a potential breakout scenario.
– Support is being found around the 103.50 level, while resistance lies near the 104.30 area.
– Moving Averages:
– The 15-minute chart shows the pair holding above the 25-period exponential moving average (EMA), a potential bullish signal.
– The 50-period EMA is slightly below the price, offering additional support.
– Indicators:
– Relative Strength Index (RSI) remains above 50, indicating sustained bullish momentum.
– Momentum indicators are showing increasing strength, signaling a potential upside move.
– Fibonacci Retracement Levels:
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Explore this further here: USD/JPY trading.