USD/JPY Forecast: Bears Maintain Control as Key Support Breaks
The USD/JPY pair continues to face downward pressure, with bears firmly in control as the key support level at 140.48 has been breached. This pivotal Fibo level represents the 61.8% retracement of the pair’s movement from 127.22 to 161.95. The upper boundary of the 140.48/00 support zone has been compromised, signaling a bearish outlook for the currency pair.
Despite a brief positive signal from Wednesday’s long-tailed daily candlestick, renewed weakness in the past two days has erased any optimism for USD/JPY. The pair is now on track for another weekly loss, with a long upper shadow on the weekly candlestick indicating strong selling pressure and suggesting further downside potential.
Technical Analysis Points to Bearish Momentum
A closer look at the technical picture on the daily chart confirms the bearish sentiment surrounding USD/JPY. Strong negative momentum, along with the price being weighed down by the descending daily Ichimoku cloud, paints a bleak picture for the pair. Additionally, the moving averages are in a bearish setup, with the formation of a death-cross between the 55-day and 200-day moving averages further reinforcing the negative outlook.
A decisive break below the 140.48/40 support levels would intensify the bearish pressure on USD/JPY and open the door for a potential extension towards the 137.23 trough, which marks the July 2023 low. Any attempts at a recovery are likely to be capped by the falling 10-day moving average at 143.22, keeping larger bears in control of the pair.
Key resistance levels to watch for include 141.68, 142.08, 143.04, and 143.22, while support levels are seen at 140.25, 140.00, 138.60, and 137.23.
Market Sentiment and Economic Factors
The bearish outlook for USD/JPY is supported by a combination of market sentiment and economic factors. Uncertainty surrounding the US economic recovery, coupled with concerns about inflation and the Federal Reserve’s monetary policy stance, have weighed on the US dollar and contributed to the pair’s weakness against the Japanese yen.
On the other hand, the safe-haven appeal of the Japanese yen has been bolstered by geopolitical tensions, particularly in the Asia-Pacific region. Rising geopolitical risks, such as the ongoing conflict in Ukraine and tensions between China and Taiwan, have prompted investors to seek refuge in the yen, further driving down the value of USD/JPY.
In addition, the Bank of Japan’s accommodative monetary policy stance has also supported the yen, as the central bank remains committed to maintaining ultra-loose monetary conditions to support the country’s economic recovery from the pandemic.
Technical Indicators and Trading Strategies
Traders and investors monitoring the USD/JPY pair should pay close attention to key technical indicators and implement appropriate trading strategies based on the prevailing market conditions. The bearish momentum and negative outlook on the daily chart suggest that short positions may be favored, with any rallies likely to be viewed as selling opportunities.
A break below the 140.48/40 support levels could trigger further downside momentum, with the 137.23 trough serving as a critical target for bearish traders. On the other hand, a reversal above the 143.22 resistance level could indicate a potential shift in sentiment and pave the way for a short-term recovery in USD/JPY.
It is important for traders to closely monitor economic data releases, central bank announcements, and geopolitical developments that could impact the currency pair’s movement. Additionally, risk management strategies should be implemented to protect against unexpected market volatility and minimize potential losses.
In conclusion, the USD/JPY pair remains under bearish pressure, with key support levels broken and technical indicators pointing to further downside potential. Traders should exercise caution and stay informed of market developments to make well-informed trading decisions in the current environment of uncertainty and volatility.
