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Japanese Yen Outlook: USD/JPY Rips To Resistance- Tug-of-War into BoJ

Japanese Yen Outlook: USD/JPY Rips To Resistance- Tug-of-War into BoJ

Michael Boutros, Strategist

Japanese Yen Technical Price Outlook: USD/JPY Weekly Trade Levels

  • Japanese Yen technical trade levels update – Weekly Chart
  • USD/JPY breakout extends into key resistance hurdle – BoJ rate decision on tap
  • Resistance 114.55, 114.92 (key), Support 113.78, 113.38 (Near-term bullish invalidation)
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The Japanese Yen is off more than 0.5% against the US Dollar this week with USD/JPY rebounding off uptrend support. The broader breakout may be vulnerable in the days ahead as price holds just below key technical resistance with the Bank of Japan interest rate decision on tap. These are the updated targets and invalidation levels that matter on the USD/JPY technical price charts heading into the BoJ. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Yen technical setup and more.

Japanese Yen Price Chart – USD/JPY Daily

Japanese Yen Price Chart - USD/JPY Daily - US Dollar vs Japanese Yen Trade Outlook - USDJPY Technical Forecas

Chart Prepared by Michael Boutros, Technical Strategist; USD/JPY on Tradingview

Technical Outlook: The late-September breakout in USD/JPY has extended over 5.1% off the September low with price extending into key resistance at the 2018 high / 78.6% retracement of the entire 2015 decline at 114.55/92(the high registered at 114.70). A pullback turned just pips ahead of the 23.6% retracement at 113.38 and keeps price within the multi-week uptrend with the BoJ on tap tomorrow. The immediate focus is on a breakout of this range.

Japanese Yen Price Chart – USD/JPY 120min

Japanese Yen Price Chart - USD/JPY 120min - US Dollar vs Yen Trade Outlook - USDJPY Technical Forecast

Notes: A closer look at yen price action shows USD/JPY trading within the confines of an embedded descending pitchfork formation extending off the highs with this week’s advance testing the upper parallel today. Initial support rests at 113.78/87 backed by last week’s low and the 38.2% retracement around ~113.38/41 – a break / close below this threshold would be needed to suggest a more significant correction is underway with such a scenario exposing the 38.2% retracement a 112.56 and key support pivot at the 61.8% retracement of the late-2015 decline / 2019 high-day close at 111.98-112.17. A topside breach / close above 114.92 is required to mark resumption of the broader uptrend with subsequent resistance objectives eyed at the Fibonacci confluence at 115.51/60.

Bottom line: The Japanese Yen may yet stage a counter-offensive with the broader USD/JPY rally vulnerable while below 115 near-term. From a trading standpoint a good zone to reduce long-exposure / raise protective stop- losses should be limited to 113.78 IF price is heading higher on this stretch with breach of the highs likely to fuel another accelerated run towards the upper parallels. Respect the daily closes - ultimately a break below 113.38 would threaten a steeper correction within the broader uptrend towards 112. Review my latest Japanese Yen Weekly Price Forecast for a closer look at the longer-term USD/JPY technical trade levels.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Japanese Yen Trader Sentiment – USD/JPY Price Chart

Japanese Yen Trader Sentiment - USD/JPY Price Chart - Yen Retail Positioning - USDJPY Technical Outlook
  • A summary of IG Client Sentiment shows traders are net-long USD/JPY - the ratio stands at -2.38 (29.55% of traders are long) – typically bullish reading
  • Long positions are20.17% higher than yesterday and 17.12% higher from last week
  • Short positions are 0.97% lower than yesterday and 6.84% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/JPY price trend may soon reverse lower despite the fact traders remain net-short.

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Key US / Japan Data Releases

Key US / Japan Data Releases - USD/JPY Economic Calendar - BoJ Interest Rate Decision / US PCE

Economic Calendar - latest economic developments and upcoming event risk.

Active Technical Setups

--- Written by Michael Boutros, Technical Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

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

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