Forex specialists at UOB Group believe the USD/JPY’s Upward trend could extend as far as the 115.00 mark in the near term. As recently as yesterday, analysts predicted that the US dollar will ‘evolve higher, but that the main resistance around 114.55 is doubtful to enter into play. Following that, the USD increased to 114.39 until ending at 114.36 (+0.04 percent).
However, while the USD rose over 114.55 during the early Asian trading hours, the upward impetus is not particularly strong, and the next significant barrier at 115.00 is not likely to be challenged anytime soon (another opposition is around 114.80). As a result of the current rising momentum, only a breach of 114.10 (minimal support is at 114.30) could suggest that it has subsided. For the past two weeks, analysts have retained a bullish outlook on the US Dollar. According to the most recent report from Monday (18 October, spot price of 114.20), experts stated that the USD “remains strong, although overbought circumstances could lead to a pullback first.”
Experts from the UOB Group went on to say that ‘the next resistance level is at 114.55, backed by 115.00. ‘In the early Asian morning hours, the USD rose over 114.55, and the attention is now towards 115.00. The extreme overbought circumstances signal that the chances of a sustained gain over 115.00 are not very favorable. The next big resistance level, at 115.60, is most certainly out of reach at this point in the cycle. On the negative, a break of 113.75 (the ‘strong support’ level that was formerly at 113.50) would signal that the USD’s recent gain has come to an abrupt halt.
Overview Of The Technical Aspects
USD/JPY CHART Source: Tradingview.com
The USD/JPY pair continued to retain its current advances to multi-year highs while oscillating between modest advances and slight losses throughout the early European trading day. For the day, the duo was last seen moving underneath the mid-114.00s, essentially unchanged from its opening position. Taking advantage of the prior day’s strong recovery from levels below 114.00, the USD/JPY cross regained some positive momentum during the first few hours of activity on Wednesday.
Overview Of The Basics
It was a poor day for the relatively secure Japanese Yen, which was significantly weakened by the growing US-Japanese federal bond yield disparity. This comes after the Fed announced in late September that it would start to decrease its monthly bond-buying by the end of 2021. Concerns that the current surge in commodity costs may feed inflation have fueled talk about a rate increase in 2022.
The prospect of a premature Fed policy tightening pushed the yield on the key 10-year US federal bond to 1.672 percent on Wednesday, the highest since May. However, the Bank of Japan’s yield curve management program kept the 10-year Japanese sovereign debt yield near zero. The fundamentals stay intact, but the extremely stretched-thin circumstances on short-term indicators prevented traders from preparing for a further upward rise.
A lack of US Dollar interest also added to the USD/JPY duo’s price bracket price movement. Traders will draw cues from planned remarks by Chicago Fed President Charles Evans and Fed Governor Randal Quarles in the dearth of substantial US economic announcements. It will affect the USD value along with US bond yields. Aside from that, the overall market risk attitude may help the USD/JPY pair.