The US dollar initially attempted to rally during Friday's trading session, but profit-taking activities dominated the market as traders sought to capitalize on recent gains. The current stretch in prices should not come as a surprise, considering the impulsive nature of the recent move. As we approach the weekend, the market may experience a slightly significant pullback. However, this pullback could present an attractive buying opportunity for those interested in acquiring "cheap" US dollars or selling overvalued Japanese yen.
USD/JPY Technical Outlook
Looking at potential price levels, the ¥142.50 mark supports the US dollar. Therefore, this pullback phase could mark the beginning of a consolidation period. On the upside, the ¥145 level presents a significant resistance barrier, and it will be intriguing to observe how the market reacts around that level. A break above ¥145 would likely trigger a significant upward surge. Nevertheless, the recent market exertion suggests that a pullback is logical and necessary to regain momentum.
Several bullish patterns have emerged, supporting a positive outlook for the US dollar against the Japanese Yen. The breakout from the bullish flag formation suggests a potential move toward the ¥148 level. Additionally, an ascending triangle pattern also indicates a target in that area. These patterns provide further evidence of the market's bullish sentiment. However, a temporary pause or pullback is not only plausible but also rational, given the recent surge in energy.
The substantial interest rate differential between Tokyo and the US Federal Reserve contributes to a significant divergence between the two currencies. This discrepancy favors continued upward momentum in the USD/JPY pair over the long term. The resulting swap offers traders an additional incentive to hold onto this currency pair. It is important to consider these fundamental factors when assessing the potential future movements of the market.
Considering the upcoming American holiday on Tuesday, it is likely that many major US firms will effectively be closed on Monday as well. This scenario may encourage further profit-taking activities among market participants. As a result, the market could witness a temporary pullback in prices.
The US dollar's recent rally has prompted profit-taking activities, leading to a consolidation phase in the market. As the market experiences a slight pullback, it presents an opportunity for traders seeking to acquire "cheap" US dollars or sell overvalued Japanese yen. Key support lies around the ¥142.50 level, while the ¥145 mark poses a significant resistance barrier. The bullish patterns and interest rate differentials suggest a favorable long-term outlook for the USD/JPY pair. However, a breather in the form of a pullback is expected before the market resumes its upward trajectory. With an upcoming American holiday, profit-taking activities may intensify.
Potential USD/JPY signal
- The USD/JPY is likely to see a pullback at this point.
- A move to the 143 level is a buying opportunity, from what I can see.
- The 142.50 level is short-term support, so my stop loss will be wwwww.
- The target is the 146 level.
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