USD/JPY Forecast: Extremely overbought but still bullish

Valeria Bednarik FXStreet

USD/JPY Current price: 108.34

US Treasury yields soared to fresh YTD highs, boosting USD/JPY.
Japan will start the week publishing economic sentiment-related data.
USD/JPY trades at fresh 2021 highs and is poised to keep rallying.

The USD/JPY pair hit 108.64 on Friday, its highest level since June 2020, finishing the week with substantial gains in the 108.30 price zone. The pair soared on Thursday as US Treasury yields came back to life and jumped higher with comments from US Federal Reserve chief Jerome Powell. Yields extended their advance on Friday following an upbeat US employment report, with the yield on the benchmark 10-year Treasury note reaching 1.626%. Additionally, US indexes trimmed Thursday’s losses to finish the week in the green.

Japan published February Foreign Reserves at the beginning of the day, which resulted in $1379.4 billion from $1392.1 billion previously. This Monday, the county will publish the February Eco Watchers survey, the January Trade Balance, and the preliminary estimate of the January Leading Economic Index, foreseen at 94.4 from 95.3 previously.

USD/JPY short-term technical outlook

The daily chart for the USD/JPY pair shows that it’s extremely overbought, but with the risk still skewed to the upside. The 20 SMA crossed above the longer ones and currently stands around 105.90. Technical indicators stabilized at their highs, with the RSI currently at 79. In the 4-hour chart and for the near-term, the risk is skewed to the upside, as technical indicators corrected extreme overbought readings but lost their bearish strength and seem ready to resume their advances. Meanwhile, the 20 SMA accelerated north, currently standing around 107.40, as the longer ones stay bullish well below it.

Support levels: 108.05 107.70 107.30

Resistance levels: 108.65 109.00 109.40

View Live Chart for the USD/JPY

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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