USD/JPY Pulls Off 5-Month Highs to Trim Weekly Gains

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The USD/JPY currency pair on Friday pulled back off the current 5-month highs to trim this week’s gains below 109.200 after a massive rally.  The currency pair has been on a bullish run since the start of the month and looks likely t maintain this trend through next week.

The pair has recently hit overbought levels but has since retreated to trade within the normal trading zone following today’s pullback This creates some interesting trading opportunities for both the bulls and the bears.

USD/JPY Fundamentals Overview

From a fundamental perspective, the USD/JPY currency pair is trading at the back of a busy period in both the US and Japanese markets. The US and China appear to have agreed on a deal to lift trade tariffs and this has boosted the greenback.

The US ISM non-Manufacturing PMI beat expectations of 53.5 with 54.7 while the ISM NY-Business Conditions Index outperformed 45.8 with 47.7. Factory orders also beat expectations as did the initial jobless claims with 211k versus 215k but continuing claims missed the expectation of 1.683M with 1.689M for the week ending November 1.

On the other hand, Overall Household Spending for September beat the expectation of 7.8% with 9.5% on a (YoY) basis while Labor Cash earnings outperformed a 0.4% consensus estimate with 0.8%. Japan’s preliminary Coincidence and Leading Economic Indexes beat expectations of 99.5 and 91.7 with 101 and 92.2.

USD/JPY Technical Analysis (the 60-min Chart)

Technically, the USD/JPY currency pair appears to be trading on an ascending wedge in the 60-min chart and this indicates a short-term bullish bias in the market sentiment. The currency pair’s latest pullback also pulled it off overbought levels in the RSI indicator bringing it closer to the 100-hour SMA.

Therefore, the bears will be looking to target short-term profits at around 109.064, 108.916, 108.722, or lower at 108.518. On the other hand, the bulls will hope for an immediate rebound towards 109.339 or higher at 109.500.

USD/JPY Technical Analysis (the Daily Chart)

In the daily chart, the USD/JPY currency pair appears to be trading within a sharply rising channel, which indicates a strong bullish bias in the long-term trading market. The pair has been on a bullish run since September when it bottomed at 104.446.

Going into next week, the bulls will be targeting long-term profits at around 109.981, 110.537, or higher at 111.133. On the other hand, the bears will hope for a quick pullback towards 108.428, 107.898, 107.415, or lower at 106.981.

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