The USD/JPY Attempts to Gain Positive Momentum – Analysis as of July 18, 2025
Original Source: Economies.com
Author: Economies.com Staff Writer
The USD/JPY currency pair is currently engaged in a strategic effort to accumulate positive momentum, with the aim of supporting its ongoing bullish trend. Recent price action indicates that the pair is attempting to rise again after some short-term corrective movements. Traders and market analysts are closely watching price behavior near key support and resistance levels to assess whether the pair can maintain upward pressure or will encounter another retracement.
As of the latest analysis, several technical and fundamental factors are contributing to the positive tone surrounding the US Dollar against the Japanese Yen. In the context of broader economic indicators, US inflationary trends, comments from Federal Reserve officials, and Japanese monetary policy provide additional context to this currency pair’s direction.
Technical Overview
The USD/JPY pair has shown resilience around a vital support zone, managing to rebound and maintain short-term gains. Based on the latest chart analysis:
– The price is trending above the 50-Day Exponential Moving Average (EMA), a sign of sustained bullish bias.
– The pair found support near the 137.50 area, which allowed bulls to re-enter the market and push prices higher.
– The resistance level at 139.80 is being tested again, and a confirmed breakout could pave the way for extended gains.
Key technical indicators further validate the pair’s potential to rise:
– The Relative Strength Index (RSI) is climbing above the 50-point threshold, showing increasing buyer momentum.
– The Moving Average Convergence Divergence (MACD) histogram remains in positive territory, while the MACD line attempts to cross above the signal line, supporting a bullish continuation.
– The overall trading structure is based on a series of higher lows and higher highs, confirming the presence of an uptrend over the medium term.
Price Action and Market Psychology
The recent rebound from the 137.50 support zone reflects renewed market optimism in favor of the US Dollar. This optimism is underpinned by:
– Strong economic data from the United States, including robust employment figures and better-than-expected retail sales.
– Continued hawkish tones from the Federal Reserve, with policymakers signaling that interest rates may remain elevated for longer than previously anticipated.
– Risk-sensitive market behavior, which tends to favor the US Dollar in times of geopolitical uncertainty or financial instability.
From a psychological standpoint, traders see the round number of 140.00 as a significant resistance level. If USD/JPY manages to decisively break above this area, further upside targets could come into play.
Fundamental Backdrop
Several macroeconomic themes are influencing the direction of USD/JPY, and these are worth examining in detail:
US Macro Fundamentals
– US inflation remains a central point of focus. The latest Consumer Price Index (CPI) data shows inflation moderating but still above the Federal Reserve’s 2 percent target, implying a persistent risk of elevated interest rates.
– The labor market continues to reflect strength, with unemployment figures falling below expectations, which contributes to wage growth and consumption.
– The Federal Reserve’s forward guidance remains conditional, but the general tone supports the narrative of “higher for longer” interest rates.
Japanese Macro Fundamentals
– The Bank of Japan (BoJ) maintains its ultra-loose monetary policy, which continues to exert downward pressure on the Yen.
– Inflation in Japan has ticked up slightly but remains below Western levels, providing the BoJ with little incentive to make significant changes to policy.
– Recent comments from BoJ officials suggest caution, with no immediate plans to raise interest rates or reduce asset purchases.
Interest Rate Differentials
The divergence in monetary policy between the Federal Reserve and the Bank of Japan creates a tailwind for the USD/JPY pair:
– The current interest rate differential offers an attractive yield carry opportunity, incentivizing flow into USD-denominated assets.
– As long as this differential remains wide, the fundamental justification
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