Original article credit: ActionForex.com
USD/JPY Weekly Outlook (as of April 27, 2024)
Source: ActionForex.com
Overview
USD/JPY experienced accelerated gains during the past week, surging significantly above key resistance levels as the Japanese yen weakened across the board. The breakout above 151.89, last seen in previous cycles, triggered a fresh wave of buying that pushed the pair beyond 158.00. The movement reflects both domestic monetary divergence and risk sentiment, as the Bank of Japan (BoJ) continues its ultra-loose policy stance while the US Federal Reserve maintains a comparatively hawkish tone.
With market nerves heightened over potential intervention from Japanese authorities, attention is now tuned to whether these sharp gains prove sustainable or whether corrections will soon follow. Key technical and fundamental levels will be watched closely in the coming sessions.
Technical Analysis
USD/JPY recorded a substantial breakout during the week:
– The pair surged past the 151.89 level, a significant resistance point last seen in 2022, confirming a continuation of the broader uptrend.
– This breakthrough invalidated earlier consolidation patterns and cleared the path towards upper resistance zones, notably in the 160.00 psychological range.
– Weekly closing levels suggest bullish continuation is likely in the near term, despite persistent intervention risks.
Momentum Indicators:
– 14-week RSI is now operating well above 70, indicating the pair is in extreme overbought territory, increasing the probability of short-term corrections or consolidation.
– MACD on the daily and weekly timeframes continues to support upward momentum, though some divergence in shorter intervals may suggest slowing velocity.
Short-Term Outlook
USD/JPY is poised for further appreciation, especially given the lack of significant near-term resistance before the anticipated 160.00 psychological level. Early next week will be crucial in determining whether the pair stabilizes above 155.00 or retraces toward support.
Key short-term technical levels to watch:
Support zones:
– 155.30: A prior intra-day resistance that could now act as minor support.
– 153.80–154.00: A cluster support zone, aligned with breakout levels.
– 151.89: Former resistance turned key support; a break below this would indicate shifting sentiment.
Resistance zones:
– 158.00: Psychological resistance, with overshoot potential.
– 160.00: Strong round-number resistance zone where intervention threats may heighten.
– Beyond 160.00: Historical reference points from late 1980s become relevant, though speculative.
Moving Averages:
– All major moving averages (50, 100, and 200-day) are aligned in bullish formation.
– The 50-day moving average continues to act as dynamic support, currently near the 149.00 level.
Trend Lines and Channels:
– Price action has departed from the gently rising ascending channel observed since early this year.
– A new steeper short-term trend line has formed, supporting price acceleration but also making short-term retracements more likely.
Fibonacci Levels:
– Fibonacci extensions based on the 127.2 percent and 161.8 percent levels, plotted from the 146.47 (late March low) to 151.89 (former resistance), imply short-term profit-taking zones near 158.50 and 160.00, aligning with recent price action.
Fundamental Analysis
The dramatic rise in USD/JPY is being driven by two primary macroeconomic factors:
1. Monetary Policy Divergence:
– The Bank of Japan reiterated its commitment to accommodative policy, as Governor Kazuo Ueda signaled no urgency for rate hikes amid subdued domestic inflation.
– In contrast, Federal Reserve policymakers delivered mixed messages, but the overall tone remains cautious on rate cuts. Recent U.S. economic data, particularly inflation and labor market reports, continue to support a “higher-for-longer” stance.
– As a result, interest rate differentials between JGBs and U
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