The USD/JPY currency pair has been trading within an upward trending channel since the start of the year. The starting point of the current trend also coincides with a major bottoming of the currency pair, which occurred at the start of January 2019. And while there have been a few pullbacks, the USD/JPY seems to enjoy a strong bullish momentum going into the latter sessions of this week.
USD/JPY Fundamental Analyses
The USD/JPY currency pair continues to ride on the increased risk tolerance by investors as they shift their investments towards riskier assets. With the US-China trade war still dominating headlines, investors see a potential high yield return should things cool down, which will give the greenback more support against major currencies.
Yesterday, President Trump softened his stance on trade Tariffs between the US and China, which pushed the USD/JPY even further for a new yearly high. According to reports, Donald Trump is considering extending the tariffs deadline by 90 days. The USD/JPY currency pair continued to push higher on Thursday morning to a new 2019 high of $111 and it still shows no signs of slowing down.
USD/JPY Technical Analysis (4-Hourly Chart)
After the USD/JPY currency pair’s recent resurgence, it’s now beginning to give the bulls more optimism going into the second half of the month. The pair now looks to set to march towards 112 and beyond, but before it gets there, the bulls will have some interesting short-term and intermediate trading opportunities to capitalize on.
Currently, they will be targeting for profits at 111.50, with this level being a realistic target by the end of the week. After breaching this level, 112 will become a target looking further into the next week.
On the other hand, the bears will be hoping for a reversal of the current bull trend. They will be looking for the 110 level as a target should there be a pullback, while 109 is the intermediate target if new twists emerge in the tariff wars between the US and China.
And with the pair just moving above the 360-day Moving Average (MA) line, to go higher it will be against a strong current in the form of technical pressure, which could force a pullback to the delight of the bears.
USD/JPY Technical Analysis (Daily Chart)
When you look at the current positioning of the pair with a wider view in the form of the daily chart, things appear to favor the bulls again. The USD/JPY currency pair’s upward movement is barely half the previous high of 113 achieved in December last year.
The pair broke through R1 on Thursday when it went past 111, and now looks set to continue towards 112. Interestingly, by trading at above 111, it means that the pair just surpassed the immediate Fib level of 61.8%, which is positioned just below R1.
Now, the bulls will be looking for long-term opportunities at R2, positioned at about 113.70. However, before that, they can target intermediate trading opportunities closer to the next Fib level. There is a major resistance zone at around the 112.70, which is positioned slightly above the 76.40% Fib level.
On the other hand, the bears will be aiming to capitalize on any pullbacks by targeting profits at S1 located at around the 110 level, which is also positioned just above the 50% Fib level. And a few movements below could drag the USD/JPY pair towards the 38.20% Fib level, which coincides with another support level 108.60.
For long-term traders, S2 provides a good target, currently positioned at 108, which also marks the most recent rebound zone for the pair.
Conclusion
In summary, the USD/JPY looks to capitalize on the slowdown of the Japanese Yen as the Bank of Japan (BoJ) continues to try to stimulate the economy by issuing more bonds. And as the US tries to mend things with China over trade tariffs, the greenback will continue to strengthen, thereby pushing the pair up north. But you cannot completely rule out a pullback because of the unstable nature of the US-China trade negotiations.