The USD/JPY currency pair has displayed apparent resilience of late, holding over the middle-143.00’s. After all, market participants hang on its every twist and turn. Key technical indicators and external economic pressures greatly influence the course of it. A 4-hour chart move above the 100-period Simple Moving Average (SMA), sustained, could spark bullish momentum for USD/JPY traders. This turn could prove to be one of the biggest catalysts for market movement.
As the pair works its way up through resistance levels and tries to hold its ground there are a number of things in play. Next week’s negotiations on TPP and Japan’s bilateral negotiations with the U.S. will be critical. At the same time, U.S. and Chinese government are both sending conflicting signals to further complicate this currency pair’s volatility.
Technical Indicators and Resistance Levels
With the pair now USD/JPY under strong resistance in the form of the 144.35 area, which lines with the 38.2% Fibonacci retracement level. This technical barrier becomes an onerous challenge for bulls looking to push the pair higher. If the USD/JPY can clearly take out this resistance point, it could open the door for more upside potential. That said, any future strength above the 144.00 level would probably face serious headwinds as the market revisits a critical support floor turned ceiling.
Indeed, market analysts stress that the USD/JPY has become mostly bearish. They think that it can play a downward path, maybe down to intermediate support at the 140.50-ish area. This level is extremely important, as any break here could point to a deeper bearish downtrend ahead. Moreover, the duo’s multi-month low keeps the quote south of the key 140.00 level, adding fears among the traders.
Short term oscillators on the 4-hour chart are showing positive momentum, indicating an imminent bearish reversal. While these are all positive developments, daily indicators have still not yet developed a discernable bullish bias in the pair. Traders are advised to continue to be a little trigger-shy before committing heavily in either direction.
Support Zones and Market Sentiment
The near-term support areas for USD/JPY seem to be key in establishing its very near-term direction. The downside in the pair is expected to be capped by 142.25 support zone. If it does indeed break convincingly below the 142.00 level, the USD/JPY could face pressure to trade lower towards the mid-141.00s.
143.25 and the big, round number of 143.00 have proven to be significant capstones for near-term bear threats. The 23.6% Fibonacci retracement from the USD/JPY March-April decline serves as an important support pivot. This underscores just how important these technical thresholds are.
Market sentiment continues to be weighed down by overall economic news, especially on the ongoing trade war between Japan and the United States. Expectations to the contrary for a successful local trade deal are taking the JPY stronger against these USD/JPY rates. This provides an additional source of demand for the Japanese currency.
Trade Dynamics and Safe-Haven Status
Fading optimism over a swift resolution to the ongoing U.S.-China trade conflict has lent additional strength to the safe-haven JPY within the USD/JPY context. Conflicting messages from each country have raised hopes only to cause disappointment. Consequently, investors are gravitating toward currencies they believe to be more stable amid this economic tumult.
After Friday’s spectacular tumble, the Japanese Yen started the week on a rather dull note. Consequently, JPY bulls have been reluctant to take on aggressive bets against USD/JPY. As the storm clouds of international trade relations gather, tensions keep climbing. Consequently, traders are hesitant to take large positions until they get a clearer picture from the economic signals.