USD/JPY Forecast: Mid-Day Analysis and Outlook
The USD/JPY currency pair is currently trading with a slightly bullish bias, as the pair maintains its upward momentum despite a recent loss of steam. The daily pivot points for today are as follows: (S1) 142.67; (P) 143.67; (R1) 144.23. The pair’s outlook remains unchanged, with a further rise in favor as long as the minor support at 141.73 holds.
The recent rebound from the short-term bottom at 139.57 is expected to extend towards the 38.2% retracement level of the decline from 161.94 to 139.57, which stands at 148.11. However, if the support at 141.73 is breached, the bias could shift to the downside, potentially leading to a retest of the 139.57 level.
In the broader picture, the USD/JPY pair has been in a corrective phase after reaching a medium-term peak at 161.94. The current decline is seen as a correction of the overall uptrend that started from the low of 102.58 in 2021. The 38.2% retracement level of the entire upswing, located at 139.26, is expected to provide strong support and limit any further downside moves, at least in the initial stages.
However, the overall risk remains tilted to the downside as long as the resistance level at 149.35 remains intact. A sustained break below the 139.26 support could open the door for a deeper decline towards the 61.8% retracement level at 125.25.
Factors Influencing USD/JPY Movement
Several factors are currently influencing the movement of the USD/JPY currency pair. One of the key drivers is the ongoing uncertainty surrounding the global economic recovery, particularly in light of the resurgence of COVID-19 cases in various parts of the world. This uncertainty has led to increased volatility in the financial markets, impacting the direction of major currency pairs like USD/JPY.
Another factor at play is the monetary policy stance of the Federal Reserve and the Bank of Japan. The recent hawkish shift in the Fed’s tone, signaling a potential tapering of its asset purchases and interest rate hikes in the future, has bolstered the US dollar against its major counterparts. On the other hand, the Bank of Japan has maintained its accommodative policy stance, which could weigh on the Japanese yen.
Geopolitical tensions, particularly between the US and China, also have the potential to influence the direction of USD/JPY. Any escalation in trade disputes or political tensions between the two countries could lead to safe-haven flows into the Japanese yen, strengthening the currency against the US dollar.
Technical Analysis and Market Sentiment
From a technical standpoint, the USD/JPY pair is currently trading above its key moving averages, indicating a bullish bias in the short term. However, the loss of upside momentum, as evidenced by the 4-hour MACD indicator, suggests that the pair may face some near-term resistance.
Market sentiment towards the USD/JPY pair remains mixed, with some traders bullish on the pair’s prospects due to the overall strength of the US dollar and the potential for further upside momentum. However, others are cautious about the pair’s outlook, citing the potential for a deeper correction given the broader bearish trend in place.
Overall, the USD/JPY pair is likely to continue its upward trajectory in the near term, supported by the ongoing economic recovery in the US and the prospect of tighter monetary policy. However, traders should remain vigilant for any signs of a reversal in momentum, particularly if key support levels are breached.
In conclusion, the USD/JPY pair is poised for further gains in the near term, with the potential for a retest of the 148.11 level. However, the broader outlook remains uncertain, with the risk tilted to the downside if key support levels are breached. Traders should closely monitor economic data releases, central bank announcements, and geopolitical developments for clues on the future direction of the pair.
