The Bulls Are Back Pulling USDJPY Higher

The Bulls are back pulling the usdjpy higher
.08 May 2024
author avatar image Andreas Thalassinos

Table of Contents

Overview

  • Financial Instrument: USDJPY
  • Title: The Bulls Are Back Pulling USDJPY Higher 
  • Timeframe: Daily
  • Session: American
  • Trend: Up
  • Trend Confirmation: EMA, Bollinger Bands, MACD, Momentum, RSI
  • Momentum: Stochastics emerged above 20
  • Support Levels: 151.727 (S1), 149.774 (61.8% Fibonacci Retracement), 146.479 ( Trough marked on March 8)
  • Resistance Levels: 158.000 (R1), 160.218 (Peak marked on April 29), 163.342 (R2)
  • Trading Strategy: Buy on Breakouts and Dips

A Japanese candlestick reversal pattern known as the Hammer formed on a 61.8% Fibonacci Retracement near the Lower Bollinger Band, pulled the US Dollar vs. the Japanese Yen exchange rate to rally above the 50-period Exponential Moving Average for four consecutive sessions at the time of writing. Traders are expected to closely monitor a currency pair in light of the forthcoming release of significant economic data that could impact currency valuations.

Technical Analysis

the usdjpy daily price chart showing the pair bouncing off its lows. The price chart also indicates potential support and resistance levels. Moreover, it shows the EMA, RSI, MACD, Momentum and Stochastics aligning with the bullish outlook for USDJPY on the daily timeframe

The USDJPY has been on an upward trend since March 8, when the currency pair rebounded from its daily low of 146.479. The exchange rate between the US Dollar and the Japanese Yen rose above the 50-period Exponential Moving Average (EMA) and reached its highest point for 2024 on April 29, at 160.218 Japanese yen. Afterward, the price dipped below the 50-period EMA but found support at the lower Bollinger Band on May 3, forming a bullish Japanese candlestick called the Hammer. Several indicators support the bullish outlook, including the EMA, Momentum, Relative Strength Index (RSI), Stochastics, Moving Average Convergence/Divergence, and the Bollinger Bands. Specifically, the exchange rate and the Middle Bollinger Band remain above the EMA(50). Additionally, the RSI is above the baseline of 50, MACD remains above the zero line, Momentum records values above 100  and the Stochastics crossed above the 20 oversold area. On the other hand, the MACD remains below its 9-period Simple Moving Average, known in technical analysis as the Signal line.

Potential Upside Targets

If the bulls manage to maintain control of the USDJPY pair, traders may consider the following three potential upside targets:

158.000: The initial resistance stands at 158.000, aligning with the Upper Bollinger Band.

160.218: The second price objective is seen at 160.218, corresponding to the all-time peak of 2024, which was marked on April 29.

163.342: An additional potential price objective could be identified at 163.342, representing the R2 resistance of the weekly Pivot Point calculation.

Potential Downside Targets

Should the bears take control of the USDJPY, traders may consider the following three potential downside targets:

151.227: The initial target stands at 151.227, aligning with the 61.8 per cent Fibonacci Retracement drawn from the swing low of 146.479 to the swing high of 160.218

149.774: The second potential support is found at 149.774, corresponding to the S1 support weekly Pivot Point.

146.479: An additional potential support could be identified at 146.479, representing the trough marked on March 8.

High Impact Economic Events

  • Thursday 11:00 am (GMT+0): Official Bank Rate (GBP) 
  • Thursday 12:30 pm (GMT+0): Unemployment Claims (USD) 
  • Thursday 05:01 pm (GMT+0): 30-y Bond Auction (USD)
  • Friday 06:00 am (GMT+0): GDP m/m (GBP)
  • Friday 12:30 pm (GMT+0): Nonfarm Employment Change (USD)
  • Friday 12:30 pm (GMT+0): Unemployment Rate (CAD)
  • Friday 02:00 pm (GMT+0): Prelim UoM Consumer Sentiment (USD)

Conclusion

The USDJPY currency pair has rebounded from its recent lows, close to the Lower Bollinger Band and the 61.8% Fibonacci Retracement level. The uncertainty of a Bank of Japan rate hike and global geopolitical tensions have caused the US Dollar to strengthen against the Japanese Yen, resulting in a higher exchange rate. However, it’s crucial to be aware of the potential risks and monitor the market closely, as it’s highly volatile. Keep yourself updated on economic events and geopolitical developments to make informed trading decisions in the USD/JPY market.

author avatar image
Andreas Thalassinos

Experienced educator with a demonstrated history of working in the financial services industry. Skilled in Technical Analysis, Market Risk, Asset Management, Stock Market, and Trading Systems. Strong professional with a MSTA by Society of Technical Analysts (UK), CFTe and MFTA focused in Master of Financial Technical Analysis from International Federation of Technical Analysts (USA).