USDJPY recently made an upside break and pullback to the 111.00 major psychological mark, and the retest seems to be completed. Price could gain bullish traction from here and make its way up to the Fibonacci extension levels.
The 38.2% extension level is just close by at 111.20 while the 50% extension lines up with the swing high at 111.31. Stronger bullish momentum could take USDJPY up to the 61.8% extension at 111.42 or the 78.6% extension at 111.59. The full extension is located at 111.80.
The 100 SMA has crossed above the longer-term 200 SMA once more to reflect the presence of bullish pressure. These moving averages are near the latest pullback, which might be the line in the sand for this brewing uptrend.
RSI has climbed out of the oversold region to signal a pickup in bullish momentum, but the oscillator appears to be heading back down again. Stochastic was also able to move north but is stalling halfway through, signaling a possible return in selling pressure.
The US dollar has been drawing support from mostly upbeat performance in US equities and positive data supportive of more Fed tightening moves. However, trade war troubles are returning since the administration released a list of Chinese goods to target for higher tariffs.
Recall that their earlier set of tariffs was met with retaliatory measures from China, and this latest and larger set could also see countermeasures. Note that these would be aimed at US exports, likely weighing on business sentiment and investment, thereby dampening US growth prospects.
Still, the yen is also being dragged lower by these trade troubles as the Asian region is closely tied to Chinese trade activity. It remains to be seen which safe-haven would reign supreme, but it’s worth noting that US monetary policy is much more hawkish compared to that of Japan.