USD/JPY Pulls Off Multi-Month Highs to Trim Yearly Gains

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The USD/JPY currency pair on Friday rallied to hit new multi-year highs of about 110.284 but pulled back late on to close at 110.130. The currency pair appears to lack enough momentum bringing in an end to a rally that extends two weeks.

The currency pair is now comfortably poised above the 100-hour SMA while the 200-hour SMA is several levels below. The pair has also pulled off overbought levels of the RSI indicator creating room for a rebound.

USD/JPY Fundamentals Overview

From a fundamental perspective, the USD/JPY currency pair is trading at the back of a significantly busy period in the US market. Japan was also busy with a lot of economic data trickling in during the week. On Monday, the latest data on Japan’s bank Lending for December showed a change of 1.8%, which was lower than the expectation of 2.1%. 

The current eco-watchers survey results from December showed an improvement to 39.8 up from 39.4 points. This beat the expectation of 36.9. N Wednesday, Machine Orders for November beat the expected (MoM) change of 3.2% with 18%. The (YoY) outcome was also better than the expectation of -5.4% with 5.3%. However, Tertiary Index for November came short of expectations on Friday with 1.3% (MoM) change versus 3.9% expected.

In the US, the NFIB Business Optimism Index for December missed the expectation of 103.1 with 102.7. Consumer Price Index ex-food and energy or December missed the (MoM) expectation of 0.2% with 0.1%. On Thursday, the Retail Sales Control Group for December beat the expectation of 0.4% with 0.5%.

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

Technically, the USD/JPY currency pair appears to be trading under strong bullish pressure after bottoming out at around 108.000 at the start of the year. The currency pair has since rallied to hit overbought levels of the RSI indicator before pulling back this week.

The bulls will be targeting short-term profits at around 110.284 or higher at 110.441. On the other hand, the bears will target the pullback at around 109.988, 109.830 or lower at 109.675.

USD/JPY Technical Analysis (the Daily Chart)

In the daily chart, the USD/JPY appears to be trading in a bullish recovery channel ina cyclical pattern. The currency pair also appears to have more room to run before hitting the trendline resistance. However, the RSI indicator appears to be about to cross to overbought levels and could trigger a pullback.

Therefore, the bears will be targeting long-term profits at around 108.375 or lower at 106.685. On the other hand, the bulls will look to retain control by targeting profits ta around 111.109 or higher at 112.428.

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