USD/JPY Technical: Bullish breakout from 4-week range ahead of BOJ

  • Higher interest rates for longer periods from Fed’s latest monetary policy stance reinforced USD/JPY strength.
  • USD/JPY staged a bullish breakout from its recent 4-week range.
  • The next key intermediate resistances stand at 142.25 and 142.80 ahead of BoJ’s monetary policy decision tomorrow.

Fig 1: USD/JPY medium-term trend as of 15 Jun 2023 (Source: TradingView, click to enlarge chart)

Fig 2: USD/JPY short-term trend as of 15 Jun 2023 (Source: TradingView, click to enlarge chart)

The USD/JPY has staged a breakout from a minor 4-week bullish basing configuration in place since 30 May 2023 minor swing high area of 149.70 reinforced by the latest US central bank, Fed’s monetary policy hawkish guidance that has indicated at least two 25 basis points of hikes to its Fed funds rate to bring the terminal rate of its current interest rate hike cycle to a median projection of 5.6%, an upward revision from its previous “dot plot” projection of 5.1% released on the March’s FOMC meeting.

This latest stance from the Fed has clearly indicated that interest rates in the US are expected to stay higher for a longer period which is a sharp contrast to the recent mixed messages on Japan’s recent inflationary trend conveyed by the Bank of Japan (BoJ) Governor Ueda that has been more skewed towards in favour to maintain the status quo of its current ultra-easy monetary policy.

Potential continuation of its impulsive move within its medium-term uptrend

As seen on its daily chart, yesterday’s post-FOMC bullish breakout above 140.70 former minor range resistance is likely to indicate the continuation of its impulsive up move within its medium-term uptrend phase in place since the 16 January 2023 low of 127.22 (depicted by the ascending channel)

The upper boundary of the medium-term ascending channel is now acting as resistance at around 142.25.

Short-term momentum in overbought condition no clear signs of exhaustion yet

Yesterday’s swift minor up move in price actions has led the 1-hour RSI to hit its overbought region (above 70%) with a value of 78.17, a whisker below an extreme overbought level of 83.51 printed on 18 May 2023. However, it has not flashed any bearish divergence signal at this juncture which suggests that short-term upside momentum may be still intact with a possible minor pull-back in price actions rather than a bearish reversal.

Watch the 140.30 key short-term pivotal support with the next intermediate resistances coming in at 142.25 and 142.80. However, failure to hold above 140.30 invalidates the bullish breakout to expose the next support zone of 138.70/137.55 (minor swing low area of 1 June 2023 & 200-day moving average).

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Kelvin Wong

Kelvin Wong

Senior Market Analyst, Asia Pacific at OANDA
Based in Singapore, Kelvin Wong is a well-established senior global macro strategist with over 15 years of experience trading and providing market research on foreign exchange, stock markets, and commodities. Passionate about connecting the dots in the financial markets and sharing perspectives around trading and investment, Kelvin Wong is an expert in using a unique combination of fundamental and technical analyses, specializing in Elliott Wave and fund flow positioning, to pinpoint key reversal levels in the financial markets. In addition, over the last ten years, Kelvin has conducted numerous market outlook and trading-related seminars, as well as technical analysis training courses, for thousands of retail traders.