- USD/JPY gains strong positive traction and recovers a major part of the overnight losses.
- A pickup in the US bond yields revives the USD demand and lends support to the major.
- The technical setup favours bulls and supports prospects for a further appreciating move.
The USD/JPY pair stages a goodish intraday recovery from a fresh weekly low, around the 138.75 region touched this Friday and builds on its steady intraday ascent through the early part of the European session. Spot prices climb further beyond the mid-139.00s in the last hour, reversing a major part of the overnight losses.
A modest pickup in the US Treasury bond yields helps revive the US Dollar (USD) demand and assists the USD/JPY pair to attract some buyers near the lower boundary of the recent trading range held over the past week or so. Meanwhile, worries about a global economic downturn continue to weigh on investors' sentiment, which, in turn, could benefit the safe-haven Japanese Yen (JPY) and act as a headwind for the major.
From a technical perspective, the recent range-bound price action witnessed over the past two weeks or so constitutes the formation of a rectangle on short-term charts. Against the backdrop of a rally from the mid-133.00s, or the May monthly swing low, this might still be categorized as a bullish consolidation phase. The outlook is reinforced by the fact that oscillators on the daily chart are still holding comfortably in bullish territory.
Moreover, technical indicators on hourly charts have also started moving in the positive territory, supporting prospects for a further intraday appreciating move. Hence, some follow-through strength towards the 140.00 psychological mark, en route to the trading range hurdle near the 140.25 area, looks like a distinct possibility. Bulls, however, might pause near the said barrier amid speculations for more sizeable interventions by the Bank of Japan (BoJ).
Investors might also prefer to move to the sidelines ahead of next week's key central bank event risks - the highly-anticipated FOMC monetary policy decision on Wednesday, followed by the BoJ meeting on Thursday.
In the meantime, any meaningful pullback might continue to find decent support near the 139.00 mark ahead of the 138.75-138.70 region. A convincing break below the latter will negate the constructive setup and prompt aggressive technical selling. The USD/JPY pair might then accelerate the downfall towards the monthly low, around the 138.45-138.40 zone, en route to the 138.00 mark and the 137.30 area, representing the 200-day SMA.
USD/JPY 4-hour chart
Key levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.