Based on the original article “USD/JPY Weekly Outlook” published on ActionForex.com and authored by ActionForex.com staff, this rewrite presents an in-depth review and expanded analysis of the USD/JPY currency pair. It incorporates the original insight while extending the content for greater depth and clarity. Full credit goes to the original author and website for the base material.
Weekly Overview: USD/JPY Holds Strong but Faces Consolidation Risks
The USD/JPY pair maintained a firm position last week, rising to 157.70 before entering a brief period of consolidation. This move signals ongoing bullish momentum, but technical indicators suggest caution as short-term overbought conditions emerge. A modest pullback or even range trading could materialize before the next leg of the uptrend.
Key Points:
– USD/JPY reached 157.70 last week, marking a strong rally continuation.
– A brief consolidation phase began post-peak, indicating a potential slowdown in the immediate uptrend.
– Indicators warn of short-term overbought conditions, calling for caution.
Technically, the bullish structure remains unchanged. As long as the minor support level at 155.72 holds, the upward trend from 140.25 (March low) is expected to continue. A decisive break above 157.70 would signal a potential advance toward the long-term Fibonacci target at 161.8.
Current Technical Landscape
The currency pair remains within a well-defined ascending trend, based both on price behavior and underlying momentum indicators. The bullish continuation from the March low of 140.25 exhibits a strong series of higher highs and higher lows. This structure strengthens the argument for sustained bullish momentum.
Near-term considerations include:
– Resistance: Immediate resistance lies at last week’s high of 157.70.
– Support: The first layer of minor support is seen at 155.72. A breakdown below this level might trigger a short-term correction.
– Momentum: Daily RSI readings are elevated, hovering near overbought levels, which indicates a possible need for a pause or shallow retreat before attempting another rally.
If the pair corrects lower, the focus will shift to the behavior around the aforementioned support levels. A bounce from 155.72 would reconfirm bullish pressure, while a failure could lead to a test of the 153.59 support.
Weekly Chart Analysis
Zooming out to the weekly time frame, USD/JPY continues to trend within its longer-term bullish channel. Importantly, price action remains above the 55-week exponential moving average, adding to the broader bullish argument. The pair appears poised to test previous multi-year highs should it surpass key resistance levels.
Highlights on the weekly chart:
– Trend Continuation: The broader uptrend from 127.20 (2023 low) remains active.
– Fibonacci Projection: A significant projection lies above current levels. The 161.8% Fibonacci extension, drawn from the 127.20 to 151.89 move, then adjusted by the 140.25 corrective low, points to 162.08 as the potential medium-term target.
– RSI Momentum: Weekly RSI remains strong, though slowly approaching elevated levels. This provides confidence in continuation but may warrant attention as the pair nears historical resistance zones.
If the uptrend persists, a push toward 162.08 cannot be discounted in the medium term. However, any significant reversal would require a sustained break below 151.89, turning the focus back to retracement levels and a re-evaluation of the overall trend bias.
Fundamental Landscape
US Dollar Strength Factors:
– Interest Rate Expectations: The Federal Reserve remains largely hawkish as inflation continues to persist above targeted levels. Elevated interest rate expectations typically support the US dollar, providing additional tailwinds to USD/JPY.
– Economic Data: Recent U.S. economic prints have surpassed forecasts in employment and manufacturing, further supporting the dollar.
– Yield Differentials: US 10-year Treasury yields continue to outperform their Japanese counterparts, sustaining the carry trade appeal
Explore this further here: USD/JPY trading.