Original article by ActionForex.com
USD/JPY Weekly Outlook (Rewritten and Expanded Version)
The USD/JPY currency pair displayed moderate movement last week, ultimately closing higher and continuing its larger medium-term uptrend. Despite temporary resistance, the pair managed to maintain strength above key technical levels, signaling sustained bullish momentum for the time being.
Technical Analysis Summary
The USD/JPY pair started the week modestly bullish and maintained upward pressure through most sessions. It rebounded from a short-lived dip to 155.50 and rose steadily, closing near the 157.00 level. The bullish trend is still intact, although traders are eyeing upcoming resistance levels for signs of potential consolidation or trend exhaustion.
Key technical observations include:
– Immediate resistance sits at 157.70, a level that capped prices earlier.
– A firm break above 157.70 would resume the larger uptrend from January’s low of 140.25.
– Should that happen, the next key target lies around the 161.8% Fibonacci projection of the 140.25 to 151.89 rally measured from the 146.47 correction low. That projection comes in at 160.12.
– On the flip side, sustained failure to breach 157.70 could bring about minor consolidation or corrections toward nearby support zones.
Short-Term Support and Resistance Levels
On a short-term basis, the USD/JPY pair has found substantial support in the 155.00-155.50 area. Dips were bought consistently in that zone last week, a sign that bullish sentiment is persisting. Bulls are now focused on overcoming resistance near 157.70.
– Resistance:
– 157.70: Immediate horizontal resistance.
– 160.12: Fibonacci projection zone, marking potential trend extension if upside holds.
– 160.50 and 162.00: Psychological levels directly above the projection, likely to attract profit-taking.
– Support:
– 155.50: Technical support that capped downside during the previous week.
– 154.50: 20-day moving average located around this area, offering dynamic support.
– 152.00-151.90: A confluence zone where past resistance may turn into future support.
A break below short-term support at 155.00 would signal potential loss of bullish momentum and open the way for deeper retracement.
Medium-Term Trend Analysis
Looking at a broader perspective, the USD/JPY pair is clearly in a medium-term uptrend originating from the January low. Key technical signs continue to project bullish continuation, though volumes have thinned recently, indicating cautious optimism.
– The pair remains above the 50-day and 100-day moving averages, which are both sloping upward to reinforce the strength of the uptrend.
– Momentum indicators like MACD and RSI are currently in supportive territory but not in overbought zones, suggesting there is still room for an up-move.
– The weekly MACD remains in positive territory, suggesting long-term bullish sentiment is still driving this rally.
However, traders should monitor developments in the bond market and the dollar index, which have historically provided leading signals for price behavior in USD/JPY.
Fundamental Factors Driving Price Action
The recent strength of the USD/JPY pair can be largely attributed to a mix of economic fundamentals and monetary policy divergence between the Bank of Japan and the Federal Reserve. Several key factors have contributed to the pair’s upward path:
– Interest Rate Differentials:
– The Federal Reserve continues to maintain relatively higher interest rates compared to the Bank of Japan.
– Even with expectations of Fed rate cuts later in 2024, the yield advantage of U.S. Treasury debt compared to Japanese government bonds continues supporting capital flows into the dollar.
– Bank of Japan Monetary Policy:
– The Bank of Japan has taken only limited steps toward policy normalization, maintaining negative or near-zero short-term interest rates.
– Intervention risk remains a threat, especially
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