The USD/JPY currency pair suffered a pullback following a high close to four-week high earlier this Friday. The commodity-linked pair continued to retreat during the first half of the European session. This movement sent alert signals to bullish traders. The USD/JPY pair nonetheless is on course for third straight weekly gains. Daily chart oscillators have just begun to turn positive here.
The currency pair’s upward journey might usefully progress to the 152.45-152.50 interim barrier. This approach may put the 100-day Simple Moving Average (SMA) to the test. It’s sitting right at the major figure of 153.00. The outlook for the USD/JPY pair is bearish. This sudden reversal can largely be attributable to a pronounced shift away from the Bank of Japan’s hawkish predilections.
Intraday Descent and Market Caution
The USD/JPY currency pair retreated from its almost four-week peak. This decline continued during the European trading session. This movement illustrates the bear in traders, for the pullback came from around the monthly high’s target, showing caution among awkwardly long traders. The duo found it hard to expand on their newfound gains past 151.00. Renewed focus on the transformative effect of this inability raised a third critical point of concern.
The retreat suggested that, even with an upside breakthrough, traders were still skeptical on the overall downside risks. The USD/JPY pair is headed for a third-straight week of advances. Should selling pressure break the 149.85-149.80 area, we could start to see more volatility in traders’ moods overall.
Potential Upward Trajectory
The market might be shy, yet the USD/JPY currency is still making pretty jumps. It indeed has enough strength to get past the intermediate obstacle of 152.45-152.50. Conversely, if strength continues beyond the 152.00 level, spot prices could aim for the 100-day SMA at around the 153.00 psychological level.
The MACD and RSI oscillators on the daily chart have only just begun to move into positive territory, which often foreshadows strong momentum for more sizable gains. This recent rise, along with the streak of weekly increases, may suggest a nascent optimism in the market that’s driving a bullish outlook.
Yet traders should be cautious as any further significant resistance or selling may change this course. The divergence in market expectations and BoJ’s hawkish pivot creates an additional complexity to forecasting future moves.
Downside Risks and Market Divergence
The USD/JPY currency pair would have strong upward impetus. Yet, it equally suffers from notable downside risks due to the BoJ’s departure from hawkish consensus. This divergence will put downward pressure on the currency pair, which would be a major headwind for any bullish thesis.
Market participants, like the global Aragorn here, are judging the strength of the Bank of Japan against prevailing market forces. Judging by this chart, the path of least resistance would be downward. This divergence may lead to hard to continue upward moves and should be traded with caution.
Traders will have to be laser-focused on economic data releases and central bank communications for any additional signals on where the market is heading. These latter two factors will be especially important in deciding whether the pair can hold on to its recent gains. Or, they could set us up for more downward pressure.