The USD/JPY currency pair on Friday rocketed to trade at a new 4-week high of about 131.175 following the latest round of US data. The currency pair now appears to have completed an upward breakout from a descending channel formation.
As a result, the pair has now rallied to trade several levels above the 100-hour moving average line in the 60-min chart. This pushed the currency pair well into the overbought levels of the 14-hour RSI.
USD/JPY Fundamentals Overview
From a fundamental perspective, the USD/JPY currency pair is trading at the back of a relatively busy period in the US market. On Friday, the US jobs data smashed market expectations with a tally of 517k compared to an estimate of 185k. However, the average hourly wage growth failed to match the forecasted growth rate of 4.9% with a (YoY) change of 4.4%. The market interpreted this negatively resulting in increased risk-off trading, which boosted the US dollar against other currencies. The ISM Services PMI also came in stronger than expected with a reading of 55.2 compared to a forecast of 50.4, while the ISM Manufacturing PMI missed 48 with a reading of 47.4.
Elsewhere, the Federal Reserve raised the base interest rate by 50 basis points in line with expectations to 4.75%, while the initial jobless claims for last beat the estimated claim count of 200k with a lower tally of 183k. On the other hand, the ADP employment change for January missed the expectation of 178k with a tally of 106k. Earlier in the week, the Japanese jobs/applicants ratio for December fell short of the forecasted ratio of 1.36 with 1.35. Preliminary industrial production for the month beat estimates, while the unemployment rate was in line at 2.5%.
USD/JPY Technical Analysis (the 60-min Chart)
Technically, the USD/JPY currency pair seems to have recently completed an upward breakout from a descending channel formation. This indicates an abrupt change in the short-term market sentiment from bearish to bullish.
Therefore, the bulls will be targeting extended gains at about 131.927 or higher at 132.537. On the other hand, the bears will look to pounce on pullbacks at about 130.499 or lower at 129.825.
USD/JPY Technical Analysis (the Daily Chart)
In the daily chart, the USD/JPY currency pair appears to be breaking upwards from a descending channel formation. This also indicates a significant shift in the long-term market sentiment from bearish to bullish.
Therefore, the bulls will be looking to ride the current rebound towards 133.578 or higher to 136.500. On the other hand, the bears will be targeting long-term profits at about 128.706 or lower at 125.540.