Bulls Maintain Control in USD/JPY Outlook on Boxing Day
On Boxing Day, USDJPY continued to hold a strong position in the market, displaying a firm tone in holiday-thinned trading. The currency pair was seen pressuring last Friday’s peak at 157.92, marking its highest point since mid-July. This development comes amidst a series of bullish signals and factors influencing the pair’s performance.
Factors Driving the USD/JPY Momentum
One key factor contributing to the USDJPY’s upward trajectory is the hawkish stance of the Federal Reserve. The Fed’s expectations that inflation will remain elevated for the foreseeable future have dampened hopes for rate cuts, thereby bolstering the USD against the JPY. Additionally, the substantial gap between the monetary policies of the Fed and the Bank of Japan (BoJ) has further supported the pair’s current position.
Technical Analysis and Key Levels to Watch
From a technical standpoint, the near-term price action for USDJPY has solidified above the broken Fibo barrier at 156.67, representing a 76.4% retracement of the correction from 161.98 to 139.57. This level now serves as a strong support, followed by the rising daily Tenkan-sen at 155.19 and key support levels at 153.62/40. The presence of strong bullish momentum and multiple golden crosses on the daily chart reinforces the bullish outlook for the pair in the near term.
Caution Amidst Overbought Conditions
While the overall sentiment remains bullish for USDJPY, traders are advised to exercise caution due to initial warnings of overbought conditions. Market participants are also keeping a close eye on the Bank of Japan’s actions, particularly after recent signals of potential intervention around the 160 mark, reminiscent of a similar move in July.
In conclusion, the USDJPY pair continues to showcase strength and resilience in the market, driven by a combination of fundamental factors and technical indicators. As traders navigate the holiday trading environment, maintaining a keen awareness of key levels and potential risks will be crucial for making informed decisions in the evolving landscape of the currency market.