USD/JPY Faces Turbulent Week with Yen Hitting 2023 Lows
The USD/JPY pair has had a turbulent week, with the yen dropping to its lowest value of 2023 at 135.11. This drop comes after a week of market volatility, as investors sought refuge in safe-haven currencies amidst the Ukraine-Russian conflict.
Despite this tumultuous week, the USD has received a tailwind from various strong data releases, including a surprising 3% increase in retail sales. In addition, manufacturing data has also exceeded analyst predictions, reflecting an improvement in the US economy. However, inflation remains a concern, with a rate of 6.4% higher than the expected 6.2%.
This inflation rate is still three times larger than the Federal Reserve’s target of 2%, leading to concerns about the potential for the central bank to raise interest rates. However, the USD/JPY pair has been relatively quiet at the start of the week, trading at 134.
Technical Analysis Suggests Potential Bullish Trend for USD/JPY Pair
Last week, the USD/JPY pair experienced a significant breakthrough at the 50-day moving average, marking the first time it had surpassed this level since September of last year. This breakthrough was a positive sign for traders closely monitoring the market, indicating the possibility of further upward momentum.
One key area to watch is the 133.0 zone, representing the 38.1% Fibonacci retracement of the pullback from the three-decade high the pair achieved in October. This zone has acted as a strong resistance point in the past, and traders will be looking to see if the current upward trend will result in a breakthrough at this level.
Oscillators also show increased momentum, another positive sign for bullish people on the pair. This trend has led to the emergence of deep buying, which could provide further support for the pair.
If there is a pullback in the market, traders can expect support near the 133.0 level. However, a convincing break below this point could signal a reversal in the trend and fast technical selling.
Key Resistance Levels to Watch in the USD/JPY Pair
As the USD/JPY pair experiences a potential bullish trend, traders and investors monitor key resistance levels that could impede its progress. One of the pair’s immediate roadblocks is in the 134.50 area.
If it fails to surpass this level, it could struggle to reach the psychological price mark of 135.00. However, if buying activity picks up around the 135.10 mark, the pair could have the momentum to climb toward the 135.6 level and eventually aim for the 136.00 mark in the coming days.
If the pair sustains this momentum, it could reach the 136.85 confluence resistance, comprising a 200-day SMA. This resistance level could be significant, as it represents a potential inflection point for the pair. A break above this level would signal that the spot prices are bottoming out and could extend the recovery from the 127 area, the lowest point in 2022.
Traders and investors should closely monitor the market to see how the pair reacts to these resistance levels. If the pair fails to break above the 134.50 area, it could signal a potential reversal in the trend. On the other hand, if it manages to break through this level and sustain its momentum, it could lead to a further upward trend.