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How to trade USD/JPY
USD/JPY TECHNICAL ANALYSIS
USD/JPY extended its lead on Thursday, climbing nearly 0.8% to 142.93, helped by rising U.S. Treasury yields after key Fed officials, including FOMC chairman, expressed support for further interest rate hikes later this year as part of the ongoing fight to restore price stability inflation back to the 2.0% target.
Bulls dominate the market in 2023, with the pair up more than 2.5% in June and roughly 9% year-to-date. So far, there are no signs that they will stop anytime soon, although caution is warranted as Japanese authorities may soon step in to curb speculative activities in the forex space.
Looking at price action, American dollar/JPY after today’s rally, it broke Fibonacci resistance at 142.50, reaching its best levels since November 2022. If this breakout continues on a weekly basis, buying momentum could pick up pace in the coming days, paving the way for a move to the psychological 145.00 level.
If a bullish scenario plays out, traders have to limit themselves more to avoid being caught on the wrong foot in the event of large-scale FX interventions. Last year, Japan’s finance ministry began selling US dollars to prop up the yen when the exchange rate flirted with 146.00 and 152.00 yen.
Looking to the downside, if USD/JPY fails to hold above 142.50 and begins to retreat, a decline towards technical support at 140.80/140.50 is likely. While prices may form a base around these levels before pulling back, a failure could threaten the constructive view and encourage sellers to challenge 139.00.
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USD/JPY TECHNICAL CHART
USD/JPY technical chart prepared by TradingView
AUD/JPY ANALYSIS
After rising almost vertically since late May and entering overbought territory, AUD/JPY it set new multi-month highs around 97.70 a few days ago. However, the upward momentum weakened due to the cautious mood in the financial markets.
While the RBA and BoJ Monetary Policy divergence can be seen as a positive driving force Australian dollar, shifts in global sentiment may be a more important catalyst to watch. In this context, traders should keep a close eye on the Chinese ones economic activity. This means that if incoming data shows that the growth profile of the Chinese economy is deteriorating, risk aversion could set in, strengthening the Japanese Yen and triggering a deep correction in AUD/JPY.
Technically, AUD/JPY sold off earlier this week but hit support near 95.80/95.55. The pair made a modest recovery from these levels, but the momentum appears to have died down on Thursday, a sign of waning buying interest.
We will have more clues on the outlook in the coming days, but if AUD/JPY extends its bounce, initial resistance lies at 96.85. A break above this ceiling could clear the way for a retest of the 2023 highs. Conversely, if sellers regain control of the market and push prices down, support remains at 95.80/95.55, but a dip could bring further losses with further direction down to 94.97, followed by 93.27.
Change in |
Longs |
Shorts |
O.I |
Daily | -23% | -2% | -8% |
Weekly | 6% | -1% | 0% |