Original Author: ActionForex.com
Title: USD/JPY Daily Technical Outlook – Extended Correction Could Persist
The USD/JPY currency pair experienced a slightly mixed session recently, with a notable lack of strong directional momentum. Following prior gains, the pair is currently undergoing a consolidation phase characterized by moderate pullbacks and sideways movement.
Key Observations:
– The pair remained under pressure after peaking near the 160.00 handle, with signs of lost upward momentum.
– A short-term correction pattern seems to be unfolding, suggesting that immediate bullish continuation is unlikely unless certain technical levels are reclaimed.
– Recent price action reflects the broader market sentiment which has turned more cautious, awaiting fresh catalysts either from U.S. economic data or monetary policy expectations.
Technical Picture:
Price Levels:
– Resistance is confirmed around 160.20, aligning with prior highs and coinciding with psychological and technical barriers.
– Support is seen near the 155.00 zone, where prior pullback lows provide a reference for a short-term floor.
Daily Chart Analysis:
– The pair is trading within a rising channel on the daily time frame but is now pulling back from upper channel resistance.
– Despite the retreat, broader trend indicators still reflect a bullish outlook as long as the structure of higher highs and higher lows remains intact.
Moving Averages:
– The 20-day Exponential Moving Average (EMA) is beginning to plateau, indicating that short-term upside momentum is weakening.
– The 50-day Simple Moving Average (SMA) continues to trend upward, showing that the medium-term trend remains in bullish territory.
– The alignment of the shorter-term EMA above the longer-term SMA still points to an overall upward trend, but weaker momentum may bring more correction.
Momentum Indicators:
– Relative Strength Index (RSI) on the daily chart has moved from overbought territory near 70 and is retreating towards more neutral levels, currently sitting around the mid-50s.
– This RSI behavior is consistent with a correction or consolidation phase rather than a full reversal.
– MACD (Moving Average Convergence Divergence) shows a bearish crossover forming, which adds weight to the case for continued near-term softness.
Fibonacci Analysis:
– The pair recently retraced slightly below the 23.6% Fibonacci retracement level of the upswing from 150.00 to just under 160.00, signaling initial profit-taking.
– The 38.2% Fibonacci level, near 156.50, may emerge as next near-term support if selling continues.
– A deeper correction, potentially toward the 50% retracement around 155.00, cannot be ruled out, especially if market sentiment remains risk-averse or if U.S. yields slide.
Short-Term Outlook:
Immediate bias remains slightly tilted to the downside while the pair stays below the 158.50 resistance mark. Any further decline below 156.00 will add to the bearish corrective narrative.
– A clear break below the 155.00 support zone could extend the retracement phase and potentially target the 152.80 area, where previous consolidation occurred earlier in June.
– Alternatively, reclaiming the 158.50 hurdle would re-expose the 160.20 highs and renew bullish appetite among traders.
Broader Market Context:
USD/JPY continues to be influenced by several macroeconomic and geopolitical factors, including:
Japanese Policy Factors:
– The Bank of Japan (BOJ) has maintained ultraloose monetary policies, but recent comments from BOJ officials hint consideration of adjusting rates if inflation sustains above target levels.
– This speculation has expanded interest in the yen’s valuation, resulting in occasional bursts of yen strength, especially when paired with risk-off sentiment globally.
– Japanese government bonds (JGB) yields have remained relatively stable, limiting local demand for foreign exchange-driven investment alternatives.
U.S. Dollar Dynamics:
– The Federal Reserve’s policy has pivoted towards moderation, with growing sentiment in the markets that interest rates may have peaked as inflation cools
Explore this further here: USD/JPY trading.