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USD/JPY Outlook Remains Constructive amid Positive Slope in 50-Day SMA

Japanese Yen Talking Points

USD/JPY is on the cusp of testing the monthly high (137.71) as it retraces the decline following the slowdown in the US Personal Consumption Expenditure (PCE) Price Index, and the exchange rate may continue to exhibit a bullish trend as it appears to be tracking the positive slope in the 50-Day SMA (135.74).

Technical Forecast for Japanese Yen: Bearish

USD/JPY appears to be stuck in a narrow range after snapping a five-day rally, but the exchange rate may continue to retrace the decline the yearly high (139.39) as long as it holds above the moving average.

USD/JPY Daily Chart

Source: Trading View

USD/JPY trades back above the 50-Day SMA (135.74) after clearing the opening range for August, with a break/close above the 137.40 (61.8% expansion) to 137.80 (361.8% expansion) region raising the scope for a run at the yearly high (139.39).

A break above the September 1998 high (139.91) opens up the 140.30 (78.6% expansion) region, with the next area of interest coming in around 141.70 (161.8% expansion).

However, USD/JPY may continue to face range bound conditions if it fails to break/close above the 137.40 (61.8% expansion) to 137.80 (361.8% expansion) region, and lack of momentum to hold above the moving average may push the exchange rate back towards the Fibonacci overlap around 132.20 (78.6% retracement) to 133.20 (38.2% expansion).

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong