Most Read: Gold, Dow Jones 30, USD/JPY – Bears or Bulls in Control?
USD/JPY has rallied sharply this year, boosted by persistent and, sometimes widening interest rate differential between the United States and Japan. Last month, the pair briefly hit a multi-decade high around 160.00, but couldn’t maintain those levels after Japanese authorities stepped in to prop up the domestic currency.
In recent weeks, the pair has seen increased volatility, oscillating up and down but going nowhere, dancing to the tune of endless market news, with the exchange rate currently sitting just below the 155.50 mark. In any case, with the Fed intent on cutting borrowing costs later this year and the apparent resumption of the disinflationary trend, USD/JPY could start moving lower in the medium term.
For a clearer signal that a sustained bearish phase has begun, traders should watch the ascending trendline that has supported the pair's rise since December 2023. This trendline, which currently aligns with the 50-day simple moving average at 153.25, is a major technical floor. A decisive breakdown of this area could trigger a sharp selloff, with potential downside targets to consider at 152.00, 150.90, and 148.85.
Conversely, if buyers regain the upper hand and initiate a bullish turnaround, resistance looms at 156.80, this week's peak. While it will be challenging for bulls to overcome this barrier, a successful breakout could see prices head back towards 158.00 and potentially 160.00. However, these rallies might be short-lived due to the possibility of FX intervention by the Japanese government to stem the yen’s bleeding.
For a complete overview of the USD/JPY’s technical and fundamental outlook, make sure to download our complimentary quarterly forecast!
USD/JPY TECHNICAL CHART
