Japanese Yen Forecast: USD/JPY Bounces as Bulls Defend Key Support

Japanese Yen Technical Forecast: USD/JPY Weekly Trade Levels

• USD/JPY attempts to snap three-week losing streak- rebounds off confluent trend support
• USD/JPY threat for larger recovery within yearly downtrend- U.S. Core PCE / NFP on tap
• Resistance 143.90, 146.95 (key), 151.65/95- Support 139.58-149.49 (key), 136.51-137.24, 129.58

The Japanese Yen is poised to snap a three-week winning streak against the US Dollar with USD/JPY rallying more than 1.1% this week. A rebound off technical support keeps the focus on a possible test of the yearly downtrend in the days ahead. Battle lines drawn on the USD/JPY weekly technical chart.

Japanese Yen Price Chart – USD/JPY Weekly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/JPY on TradingView

Technical Outlook: In my last Japanese Yen Technical Forecast we noted that USD/JPY had,  “reversed off long-term technical resistance last month with the recent decline breaking below the September uptrend. The immediate focus is on this week’s close with respect to 151.95-152.50. From a trading standpoint, rallies should be limited to 155 IF price is heading lower on this stretch with a break of the lows needed to fuel the next leg of the decline.” USD/JPY broke below support the following week with price plunging more than 11.9% off the January high.

The decline rebounded off technical support this week at 139.58-140.49- a region defined by the December 2023 low, the 2024 swing low, and the 61.8% retracement of the 2023 advance.  Note that the 2021 slope remains intact on close basis and we’re looking for possible inflection off this zone in the weeks ahead with the immediate decline vulnerable while above.

Initial resistance is eyed with the 2024 low-week close (LWC) at 143.90 and is backed by the 61.8% retracement of the September rally at 146.95. Note that the median-line converges on this threshold over the next few weeks and a breach / close above would be needed to suggest a more significant low was registered this week. The next major technical consideration is eyed with the 52-week moving average / the 2022 & 2023 highs at 151.64/95.

A break below the 139.58 pivot zone exposes the 100% extension of the 2024 decline / July 2023 swing low at 136.51-137.24- an area of interest for possible exhaustion / downside exhaustion IF reached. Losses below this threshold could threaten another bout of accelerated losses towards the 2023 LWC at 129.59.

Bottom line: USD/JPY has responded to support near the 2024 swing lows and the focus is on this near-term recovery within the broader downtrend. From at trading standpoint rallies would need to be limited to 146.95 IF price is heading lower on this stretch with a close below 139.58 needed to fuel the next leg of the decline.

Keep in mind we get the release of key U.S. inflation data (Core PCE) and Non-Farm Payrolls next week into the monthly cross. Stay nimble into the releases and watch the weekly closes here for guidance. I’ll publish an updated Japanese Yen Short-term Outlook once we get further clarity on the near-term USD/JPY technical trade levels.

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Economic Calendar - latest economic developments and upcoming event risk.

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--- Written by Michael Boutros, Sr Technical Strategist

Follow Michael on X @MBForex