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Yen Forecast: USD/JPY Rips to Five Year Highs-Exhaustion Ahead?

Japanese Yen Technical Price Forecast: USD/JPY Weekly Trade Levels

  • Japanese Yen technical trade levels update – Weekly Chart
  • USD/JPY surges into uptrend resistance at five-year highs; attempting fifth weekly rally
  • Support 114.55/92, 112.76 (critical)- Resistance at 116.08, 116.90

The US Dollar is attempting to open the year with a fifth consecutive weekly rally against the Japanese Yen with USD/JPY ripping into uptrend resistance at five year highs. While the broader focus remains constructive, the rally may be vulnerable in the days ahead while below this key zone. These are the updated targets and invalidation levels that matter this month on the USD/JPY weekly price chart.Join my Weekly Strategy Webinars for an in-depth breakdown of thisDXY technical setup and more.

Japanese Yen Price Chart – USD/JPY Weekly

Japanese Yen Price Chart - USD/JPY Weekly - US Dollar vs Japanese Yen Trade Outlook - Technical Forecast

Chart Prepared by Michael Boutros, Technical Strategist; USD/JPY on Tradingview

Notes: In my last Japanese Yen Weekly Price Outlook we noted that the USD/JPY breakout was testing a major inflection zone at 114.55/92 and that a, “topside breach / weekly close above this threshold is needed for the immediate long-bias to remain viable with such a scenario exposing the August 2015 swing lows at 116.08 backed by the 2017 high-week close at 116.90.” USD/JPY opened 2022 at 115.09 with price rallying more than 1.1% to register a high at 116.35 early in the week- is an exhaustion high in place?

I’d be cautious fighting this rally just yet as weekly momentum holds in the overbought territory but conditions are favorable for possible exhaustion on the back of the recent four-week rally. Initial weekly support now rests at back at the 2018 swing high / 78.6% Fibonacci retracement of late-2016 decline at 114.55/92 with broader bullish invalidation raised to the November low-close at 112.76. A topside breach / close above the median-line would keep the focus on subsequent resistance objectives at 116.90 and the December 2016 high-week close at 117.90.

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Bottom line: The USD/JPY rally is testing confluent resistance around the 116-handle into the start of the month / year – looking for possible inflection here for guidance. From a trading standpoint, a good zone to reduce long-exposure / raise protective stops – losses should be limited to 114.55 IF price is indeed heading higher on this stretch. Stay nimble here heading into US Non-Farm Payrolls (NFP) on Friday. I’ll publish an updated Japanese Yen Price Outlook once we get further clarity on the near-term USD/JPY technical trade levels.

Japanese Yen Trader Sentiment – USD/JPY Price Chart

Japanese Yen Trader Sentiment - USD/JPY Price Chart - Retail Positioning

  • A summary of IG Client Sentiment shows traders are net-short USD/JPY – the ratio stands at -2.72 (26.87% of traders are long) – typically bullish reading
  • Long positions are22.43% higher than yesterday and 1.28% lower from last week
  • Short positions are4.17% lower than yesterday and 9.07% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise. Traders are less net-short than yesterday but more net-short from last week. The combination of current positioning and recent changes gives us a further mixed USD/JPY trading bias from a sentiment standpoint.

US / Japan Economic Calendar

US / Japan Economic Calendar - USD/JPY Event Risk - NFP - Core Inflation

Economic Calendarlatest economic developments and upcoming event risk.

Previous Weekly Technical Charts

— Written by Michael Boutros, Technical Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex