USD/JPY Forecast: Eyes 200-week MA hurdle after bull breakout

The Japanese Yen is losing its safe haven appeal.
USD/JPY has eroded 2015-2018 falling trendline.
The line chart shows the upside break of the 18-month long channel.
The pair could rise to 113.23 (200-week moving average) before Friday's NY close if the US CPI beats estimates.

Omkar Godbole FXStreet Contributor

The USD/JPY pair rose to a six-month high of 111.12 on Wednesday, contradicting popular narrative which called for a stronger Yen amid trade tensions and risk-off sentiment.

A big move was in the offing as discussed yesterday as volatility, as represented by the monthly chart Bollinger Bands, had hit an 11-year low.

The traditional inter-market correlations have broken down and the Japanese Yen is taking cues from its Asian brethren, particularly Chinese Yuan, which fell below 6.7 per USD yesterday on escalating trade tensions.

Also at play is the growing Fed-BOJ monetary policy divergence. The Japanese central bank is miles away from reaching the 2 percent inflation target and hence policy tightening is still a distant dream.

Meanwhile, inflation is running hot in the US. For instance, the Producer Price Index (PPI) for final demand (FD) rose 3.4 percent for the 12 months ending in June, on an unadjusted basis, the U.S. Department of Labor reported on Wednesday. It was the largest 12-month increase since climbing 3.7 percent in November 2011. So, there is a real risk the Fed would revise higher neutral rate in the near future and shall raise rates at a faster pace.

Further, the technical charts are biased bullish. At press time, the currency pair is trading just above 112.00.

Weekly chart

Daily chart

The pair closed above 111.40 (May 21 high) yesterday, adding credence to rebound from the ascending trendline support and crossed the three-year-long falling trendline (drawn from August 2015 high and December 2015 high) with strength.

View

The bullish breakout has opened the doors to 113.23 (200-week moving average).
The rally to 113.23 could happen before Friday's NY close if the US consumer price index (CPI), scheduled for release today, beats estimates.
A weekly close (Friday's close) below 111.00 would abort the bullish view.

Author

Omkar Godbole

FXStreet Contributor

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

USD/JPY eyes August swing low, near 155.20 ahead of US NFP

USD/JPY retests the August monthly swing low during the Asian session on Friday as a more hawkish repricing of BoJ rate-hike bets and a suspected intervention continue to underpin the Japanese Yen. Meanwhile, the US Dollar is seen consolidating the previous day's heavy losses amid soft US bond yields, further weighing on the currency pair as traders keenly await the US NFP report.

AUD/USD consolidates above 0.7200; US NFP awaited

AUD/USD holds steady above 0.7200, near its highest level since mid-May, as bulls await the US NFP report for more cues on the Fed's policy path before placing fresh bets. Meanwhile, the recent decline in US bond yields keeps the US Dollar depressed near its lowest level in over a week and acts as a tailwind for the Aussie amid the RBA's hawkish tilt.

Gold tumbles as blockbuster US NFP lift US Dollar, Treasury yields

Gold (XAU/USD) falls sharply on Friday, snapping a two-day recovery after the US Nonfarm Payrolls (NFP) report surprised strongly to the upside. The metal briefly climbed above $4,500 on Thursday, gaining nearly 2%, but has since erased a large part of that advance.

Crypto’s $638 million buyback boom may not be as bullish as it looks

Decentralized Finance (DeFi) protocols reportedly spent $638 million to buy back their native tokens in August, up 17% from a year earlier. On the surface, the buyback trend suggests the cryptocurrency industry is maturing fast, adopting one of Wall Street’s oldest tools to bolster valuations and distribute revenue. The headline becomes less impressive once the number is opened up.

Why hawkish Bank of Japan expectations aren't enough to sustain the Japanese Yen rally

The Japanese Yen (JPY) experienced a sudden burst higher after falling back below the 160.00 psychological mark against the US Dollar (USD) earlier this week amid a more hawkish repricing of Bank of Japan (BoJ) rate hike expectations.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.