USD/JPY Weekly Outlook – Comprehensive Analysis
Source: ActionForex.com – Original Author
The USD/JPY currency pair experienced notable developments this past week, maintaining bullish momentum and rising from support levels to continue its broader uptrend. The pair’s actions suggest that the upward trajectory remains intact, underpinned by favorable technical conditions and macroeconomic fundamentals.
Below is a detailed analysis of the USD/JPY movement over the past week and projections for the near term, structured to help traders better understand and anticipate market behavior.
Weekly Highlights and Technical Summary
– USD/JPY maintained upward momentum throughout the week, supported by a rebound from below the 20-day moving average.
– The pair hit a high of 157.70 before facing resistance, pulling back slightly into the next trading sessions.
– The broader trend has been bullish for several months as the dollar remains strong amid expectations of interest rate divergence between the Federal Reserve and the Bank of Japan.
– Last week’s closing near the upper trading range indicates continued buying interest and solid sentiment.
Price Structure and Support/Resistance Levels
Several key technical levels provide insight into potential future price movements. Observing these areas can help traders set entries, exits, or stop-loss orders effectively.
Support Levels
– Initial support is seen at 153.59. This is a critical level to watch if any downside correction gains pace.
– The next layer of support is around 151.86, aligning with the 55-day Exponential Moving Average (EMA) zone.
– Further support lies near 150.87, which is the 38.2 percent Fibonacci retracement level of the rally from 140.24 to 157.70.
Resistance Levels
– On the upside, immediate resistance rests at 157.70, which was the intraday weekly high.
– A clear break and sustained trading above 157.70 could open the door to 160.00, a psychologically significant level.
– Further bullish extension could target 161.80, based on longer-term Fibonacci projection levels.
Technical Indicators Overview
Several indicators help to confirm the current bullish trend or signal potential reversals ahead:
Bollinger Bands
– The price touched the upper boundary of the Bollinger band early in the week before retracting slightly, suggesting short-term overbought pressure.
– Overall, the pair continues to trade above the middle band, which is a sign of sustained upside momentum.
Relative Strength Index (RSI)
– The daily RSI remains elevated but does not show strong divergence, indicating that the uptrend could continue without immediate risk of reversal.
– The RSI has not reached extreme overbought levels, suggesting room for continued appreciation.
Moving Averages
– The pair trades comfortably above both the 20-day and 55-day EMAs.
– The 20-day EMA offers dynamic support, closely aligned with the current trendline.
– A bullish crossover of shorter EMAs over the longer EMAs supports the continuation of upward momentum.
Weekly MACD Indicator
– The Moving Average Convergence Divergence (MACD) remains in positive territory, although showing a flattening slope, which may hint at slowing momentum.
– A crossover on the MACD histogram could signal a short-term consolidation or pullback phase.
Fundamental Backdrop
While technical indicators support the ongoing uptrend in USD/JPY, macroeconomic and monetary policy fundamentals reinforce the pair’s bullish outlook.
US Dollar Strength
– The US economy continues to outperform major peers, particularly Japan, in terms of economic growth, labor markets, and inflation.
– The Federal Reserve has signaled a “higher-for-longer” stance on interest rates, with markets now projecting rate cuts to occur later rather than sooner.
– Hawkish rhetoric from Fed officials and persistent inflation readings provide support to USD strength.
Bank of Japan’s Policy Divergence
– The Bank of Japan remains largely accommodative, maintaining near-zero interest rates despite some indications of price pressures.
– Markets are skeptical of BOJ’s ability or willingness to
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