Based on the original article from ActionForex.com titled “USD/JPY Weekly Outlook” by ActionForex.com, here is a rewritten version of the analysis, expanded to exceed 1000 words, while integrating deeper insights and structuring with bullet points for clarity.
Credit: Original analysis by ActionForex.com, adapted and expanded here.
USD/JPY Weekly Technical and Fundamental Outlook
The USD/JPY currency pair finished the latest trading week on a strong note, registering a significant upside movement. The bullish trend accelerated toward the end of the week as USD found broad-based strength, and the JPY broadly weakened due to diverging monetary policy expectations between the Bank of Japan (BoJ) and the US Federal Reserve (Fed). As the market anticipates further interest rate divergence, the pair appears poised for additional gains, but resistance and overbought conditions may offer short-term obstacles.
This comprehensive weekly outlook explores the technical setup, fundamental backdrop, and market sentiment factors that are influencing USD/JPY price action, along with key levels traders should monitor going into the next trading week.
Price Action Overview
– USD/JPY closed the week strongly after recovering from some mid-week selling pressure.
– The pair surged from below the 155.00 level and ended near the 157.50 range, reflecting bullish strength.
– The move resumed the larger uptrend that has dominated most of 2024, supported by yield differentials and policy divergence.
– The rally followed a recent period of consolidation and profit-taking, suggesting that bulls have regained control in the short term.
– The breakout over near-term resistance levels confirms a continuation of bullish momentum.
Technical Analysis
Daily and Weekly Charts:
– Resistance Levels:
– Immediate resistance is located at 157.70. A clear break above this level would confirm the continuation of the uptrend from January 2024’s low.
– A sustained move past the 157.70 level would target the 160.00 psychological handle, a level last tested in multi-decade highs.
– A break above 160.00 could open the way to 162.50, a long-term Fibonacci extension of the recent rally.
– Support Levels:
– Initial support lies at 155.00, a recent breakout level.
– Below that, the weekly moving average cluster around 153.00 may provide significant technical cushioning.
– A critical support is at 151.86, which is the last swing low. A break below would potentially shift the medium-term outlook to neutral.
– Momentum Indicators:
– RSI (Relative Strength Index) on both the daily and weekly charts remains above 70. While this indicates potential overbought conditions, strong upward momentum can persist in such scenarios.
– MACD (Moving Average Convergence Divergence) remains in bullish territory, with the signal line still upward sloping, reinforcing the continuation of the uptrend.
Trend Structure:
– The recent uptrend started from 140.25 (the January 2024 low), forming a strong base for the current bullish cycle.
– The market has formed consecutive higher highs and higher lows across multiple time frames, confirming the integrity of the uptrend.
– Price remains firmly above the 50-day and 200-day moving averages, indicating long-term bullish conditions remain in place.
– No bearish divergence has emerged yet on the momentum indicators, meaning the bulls are currently in charge of this market.
Fundamental Drivers
The fundamental landscape continues to favor USD gains over JPY due to distinct policy paths taken by the Federal Reserve and the Bank of Japan.
Monetary Policy Divergence:
– US Federal Reserve:
– Recent Fed communications have leaned hawkish as inflation remains sticky and economic activity continues to show resilience.
– Fed Chair Jerome Powell and other FOMC members have pushed back against near-term rate cut expectations, emphasizing the importance of achieving lasting inflation control.
– The Fed’s projected rate path continues to support the US dollar, especially against lower-y
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