USD/JPY Forecast: Consolidation likely, overall outlook remains constructive

Omkar Godbole FXStreet Contributor

The Dollar-Yen pair staged a solid rebound from the 10-DMA on Tuesday on the back of a hawkish Yellen and more 'Kim fatigue'. The spot rose to 112.48 yesterday and extended gains to a high of 112.55 levels in the Asian session today.

Despite being bid above the 200-DMA, the currency pair is having a tough time, extending gains beyond the 112.50 levels. At press time, the spot is trading at 112.37 levels. The exhaustion could be attributed to technical factors rather than macro/fundamental ones, which favor of a rally to 125.00 levels in the medium-term.

Technicals - Consolidation likely

Daily chart

The sliding 14-day Average True Range [ATR] suggests declining interest in the uptrend. Thus, short-term consolidation is likely in the range of 113.00 - 111.50.
The 14-day RSI remains bullish, the 10-DMA is sloping upwards. Thus, dips to 111.50 could be met with fresh bids.
The range is more likely to be breached on the higher side, given the dollar revival on the back of hawkish Fed.
A bearish break below 111.50 could be seen only if the situation in the Korean Peninsula escalates to a war-like situation...

However, there seems to be a consensus in the market that North Korea understands the downside of war and is unlikely to strike the US. "The most likely scenario for the US/North Korea relations remains an uneasy status quo", says Natixis Research Team.

No wonder, the markets are developing "Kim Fatigue", i.e. the risk-off on rhetoric quickly runs out of steam.

Also worth noting, Japan could suffer collateral damage if the US/North Korea go to war. Thus, the Japanese May lose its safe-haven appeal.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.