- The negative divergence on the USD/JPY daily chart caused a drop of 200 pips, just above the May 9 high around 131.34.
- Market risk aversion favors the Japanese yen, despite the Fed’s rate hike.
- A USD/JPY move above 133.00 opens the door to 135.00, otherwise a drop to 131.00 is on the cards.
The USD/JPY extends its losses for the second day in a row, despite the Federal Reserve raising interest rates by 75 basis points more than initially forecast, which initially boosted the USD, with USD/JPY jumping near 135.00, but gave way JPY bulls, which have since dragged the pair below the 132.00 zone. At the time of writing, USD/JPY is trading at 132.06.
US equities continue to slide as recession fears mount. Meanwhile, the USD remains on the defensive, as evidenced by the US Dollar Index (DXY), which is down 1.1% to 103.98. US Treasury yields, led by the 10-year Treasury yield, are down six basis points, yielding 3,330%.
USD/JPY Price Forecast: Technical Outlook
daily chart
In a June 15 article, a USD/JPY technical analysis, I wrote that “the last couple of cycle highs came while the Relative Strength Index (RSI) made two peaks, but the second peak was lower than the previous one, meaning a negative divergence has formed. That said, USD/JPY could be headed for a pullback.”
That said, during the trading session on Thursday, USD/JPY tumbled 200 pips from the daily high at 134.67 towards the daily low around 131.49, 15 pips above the daily high of May 9 turned into support. at 131.34.
4 hour chart
USD/JPY has a neutral bullish bias, as seen on the 4-hour chart. Once the negative divergence dropped the pair towards 131.45, the buying pressure pushed the pair back above the 132.00 level. However, a move in the Relative Strength Index (RSI) above the 50 midline, along with a rally in USD/JPY towards 133.00, is necessary if USD/JPY bulls want to stay in control.
To the upside, the first resistance for USD/JPY would be the daily S2 pivot at 132.21. If it breaks above, the S1 pivot would come in at 133.00, followed by the Simple Moving Average (SMA) at 133.84. On the other hand, the first support of the USD/JPY would be 132.00. A break of the latter would send the pair towards the May 9 high at 131.34, followed by the 100 SMA at 131.21 and then the 200 SMA at 130.19.
Technical levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
