USDJPY Seeks Return to Bullish Trajectory

Summary

• Support & Resistance: USDJPY trades near 145.00, facing resistance at 145.35 and support at 143.98. A sustained break above 145.35 could open the door toward 147.25, while a move below 143.98 would indicate a potential bearish reversal.
• Chart Patterns: A Double Bottom pattern is forming near 145.65, suggesting bullish potential. If price confirms a breakout above 147.25, the pair could advance toward 149.05, completing the reversal structure.

Fundamental Factors Affecting USDJPY

• U.S. Outlook:
  • Moody's credit downgrade (Aaa to Aa1) has sparked concerns over U.S. fiscal stability, citing the rising $36 trillion federal debt.
  • The downgrade triggered a bond sell-off, pushing 30-year Treasury yields above 5%, the highest in 18 months, and weakening the U.S. dollar.
• Fed Policy:
  • Fed officials, including Alberto Musalem (St. Louis) and Raphael Bostic (Atlanta), signaled a pause in rate hikes, citing the need for more precise economic data. This contributed to dovish USD sentiment.
• Japan Outlook:
  • The Tertiary Industry Activity Index fell to -0.3%, indicating a cooling services sector.
  • Despite this, the Bank of Japan remains committed to its ultra-loose monetary policy, maintaining the overnight call rate around 0.5%, weakening the JPY structurally.

Key Takeaway for Traders

USDJPY is consolidating around 145.00 amid diverging fundamentals. While U.S. fiscal concerns and Fed dovishness pressure the dollar, Japan's persistent low rates limit yen strength. A confirmed break above 147.25 may signal bullish continuation toward 149.05, while a drop below 143.98 could signal reversal. Traders should watch for key U.S. inflation data and BoJ policy commentary for further direction.

USDJPY – H4 Timeframe

The price action on the daily timeframe chart of USDJPY has now reached the critical region of the Fibonacci retracement tool—that is, between 76% and 90%. The double bullish break of structure sets the tone for the bullish sentiment, whilst the rally-base-rally demand zone, the trendline support, and the Fibonacci levels provide the confluences that point towards the likelihood of a bullish continuation.

Analyst's Expectations: 

Direction: Bullish

Target- 148.684

Invalidation- 141.797

CONCLUSION

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