- USD/JPY soars during the week, despite US dollar weakness across the board.
- Rising US T-bond yields underpins the USD/JPY pair.
- US Retail Sales upwardly surprised, rose by 0.7%, more than expectations.
The USD/JPY extends its one-and-a-half month rally, advances 0.47% during the New York session, trading at 114.21 at the time of writing. As portrayed by US equity indexes rising between 0.46% and 1.12%, positive market sentiment in the financial markets weighs on the Japanese yen.
Additionally, the US T-bond yields, which correlate positively with the USD/JPY pair, are climbing. The 10-year US Treasury yield is up to six basis points, sitting at 1.577%, boosts the greenback against the yen.
Meanwhile, upbeat US macroeconomic data lend a hand to the greenback. Surprisingly, US Retail Sales for September rose by 0.7%, higher than the 0.2% contraction foreseen by economists. Excluding autos and gas, sales expanded by 0.7%, better than the 0.5% in the previous month.
Furthermore, the University of Michigan Consumer Sentiment Index reading was 71.4, worse than the 72.8 estimated by investors, the second-lowest reading since 2011, as consumers grew more concerned about current conditions and the economic outlook.
USD/JPY Price Forecast: Technical outlook
The USD/JPY had witnessed a 400 pip rally since October 4, when it was trading around 110.50. The Relative Strenght Index (RSI) at 75, depicts that the upward move is overextended, as the RSI showed oversold conditions since October 11. On that same day, the 50-day moving average (DMA) crossed over the 100-DMA, giving a boost to the pair, as the correct order for moving averages in an uptrend is the shorter-time frames moving average, over the longer time frame ones.
That said, the USD/JPY first resistance level is October 4, 2018, high at 114.54, which is a crucial price level, unsuccessfully tested four times in four years. A break above the latter can clear the way for further gains, exposing key resistance levels like January 27, 2017, high at 115.37, followed by January 9, 2017, high at 117.52.
On the other hand, failure at 114.00 could open the door for a leg-down in confluence with the current RSI oversold conditions. The first of the critical support levels to be tested would be the October 13 high at 113.79, followed by the October 12 low at 112.99, and then the October 8 high at 112.24.
KEY ADDITIONAL LEVELS TO WATCH
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
Gold climbs above $2,340 following earlier drop
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.