The USDJPY currency pair has exhibited strong bullish momentum, underpinned by a confluence of technical and fundamental drivers. A clear trend reversal has emerged, as the pair broke through critical resistance levels, with further confirmation provided by technical indicators.
On the fundamental front, recent remarks from Prime Minister Shigeru Ishiba regarding the Bank of Japan’s monetary policy have introduced renewed volatility into the market. Ishiba’s opposition to immediate rate hikes, following his discussion with BOJ Governor Kazuo Ueda, has pressured the yen, contributing to the pair’s ascent. This blend of technical strength and evolving fundamentals highlights key resistance and support levels that traders should closely watch as the USDJPY navigates this shifting landscape.
High Impact Economic Events
Wednesday 04:00 am (GMT+3) – New Zealand: Official Cash Rate (NZD)
Thursday 15:30 (GMT+3) – USA: CPI m/m (USD)
Friday 09:00 am (GMT+3) – UK: GDP m/m (GBP)
Friday 15:30 (GMT+3) – Canada: Employment Change (CAD)
Friday 15:30 (GMT+3) – USA: PPI (USD)
Chart Analysis
Since bottoming at 139.568 on September 16, the USDJPY pair has exhibited a sustained uptrend, reinforced by the formation of a bullish Hammer candlestick pattern, a widely recognized signal in technical analysis indicating a potential shift in market sentiment. The reversal pattern marked a critical turning point, fueling the pair’s upward trajectory. Additionally, the occurrence of a failure swing further validated the bullish outlook. The failure of prices to break below the 139.568 swing low and a decisive breach of the 146.482 peak confirmed a trend reversal, solidifying the bullish momentum.
Technical indicators and oscillators also support the USDJPY’s bullish bias. Prices are trading above the 20- and 50-period Exponential Moving Average (EMA), reinforcing the rally. Moreover, the Momentum oscillator moved past the 100 line, and the Relative Strength Index (RSI) climbed above 50. However, the 20-period EMA has yet to cross the 50-period EMA.
Key Resistance Levels
Should the buyers maintain market control, traders may direct their attention toward the four potential resistance levels below:
149.479: The initial resistance is estimated at 149.479, which corresponds to the 161.8% Fibonacci Extension drawn from the swing high of 146.482 to the swing low of 141.632.
154.329: The second price target is seen at 154.329, aligning with the 261.8% Fibonacci Extension drawn from the swing high of 146.482 to the swing low of 141.632.
158.526: The third price objective is projected at 158.526, corresponding to the weekly resistance (R3) calculated using the standard Pivot Points methodology.
161.941: An additional price target is set at 161.941, reflecting the daily high from July 3.
Key Support Levels
Should the sellers take market control, traders may consider the four potential support levels listed below:
146.482: The initial support level is identified at 146.482, representing a confluence of the swing high from September 27 and the weekly Pivot Point.
143.810: The second support level is seen at 143.810, representing the weekly support (S1) calculated using the Pivot Points methodology.
141.632: The third support level is positioned at 141.632, reflecting the swing low marked on September 30.
139.568: An additional downside target is noted at 139.568, corresponding to the daily low formed on September 16.
Fundamentals
Prime Minister Shigeru Ishiba’s recent comments opposing interest rate hikes by the Bank of Japan (BOJ) caught financial markets off guard, as he had previously been seen as supportive of such measures.
After a meeting with BOJ Governor Kazuo Ueda, Ishiba indicated that the current economic environment does not justify additional interest rate hikes, leading to a weakening yen and a rise in stock prices. Some analysts have raised questions about the potential impact of his remarks on the BOJ’s independence, while others emphasize the importance of careful communication to avoid market fluctuations. Ishiba later clarified that his statement aligned with Ueda’s view that there is sufficient time to consider future rate decisions.
Conclusion
In summary, the USDJPY pair continues to demonstrate strong bullish momentum, driven by both technical and fundamental factors. The breakout from key resistance levels, supported by favorable technical indicators, highlights a clear trend reversal. On the fundamental side, recent comments from Prime Minister Shigeru Ishiba regarding interest rate policies have introduced volatility, influencing market sentiment and pressuring the yen.