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Dollar Yen Forecast: USD/JPY Extends Losses After Strong Bull Run

Dollar Yen Forecast: USD/JPY Extends Losses After Strong Bull Run

Tammy Da Costa, Analyst
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Dollar Yen Technical Outlook: Bearish

  • USD/JPY RSI points lower after two consecutive weeks of losses
  • DollarYen potential pullback or reversal?
  • Price action falls below the 50 SMA (moving average), 130.00 – 136.00 remains key.
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USD/JPY Extends Losses, Weekly RSI Points Lower

USD/JPY has continued to move lower as the narrowing of yield differentials and softer economic data limits Dollar strength.

With a hawkish Federal Reserve and aggressive rate hikes fueling the steep rally, the major currency pair has experienced two weeks of consecutive losses after reaching a fresh 24 year high in mid-July.

After the formation of a golden cross (50 MA crosses above the 200 MA) on the weekly time-frame, bulls continued to drive price action higher before running into a wall of resistance just below the 140.00 psychological handle.

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While this level holds as critical resistance for both the short and longer-term move, the weekly RSI (Relative Strength Index) has retreated from overbought territory with the 132.5 mark (weekly low) forming as support.

USD/JPY Weekly Chart

Chart prepared by Tammy Da Costa using TradingView

However, the daily chart below highlights the manner in which the 50-day MA (moving average) has provided additional support for the uptrend. With sellers temporarily driving lower, the a break of 132.00 could see an increase in the momentum of the downtrend with the next level of support holding at the 38.2% Fib of 127.84.

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USD/JPY Daily Chart

Chart prepared by Tammy Da Costa using TradingView

But, if bears fail to gain traction, a hold above 132.5 and above the 50-day MA (134.26) could allow for a retest of 137.27 and towards that 140 spot.

--- Written by Tammy Da Costa, Analyst for DailyFX.com

Contact and follow Tammy on Twitter: @Tams707

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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