- USD/JPY Outlook: Japanese Yen continues to gain strength against the greenback but a short term pullback seems to be around the corner.
USD/JPY extended its monthly losses on Friday. The forex pair fell for the third consecutive day as the Japanese Yen once again outperformed the greenback. The price action comes at a time when the dollar strength index is having a rebound after hitting 5-month lows earlier this week.
At the time of writing, USD/JPY stood at 140.97 during its New York Session on the last trading day of 2023. On a yearly timeframe, the pair is still up 7.53%, which shows that the US dollar is set to close its second consecutive year in green against the Japanese yen.
However, on the monthly and weekly timeframe, bears have regained control as I forecasted after a rejection from the 151.94 level in November 2023. Since then, the pair has tumbled 7.11% as the bears kept gaining momentum.
After an intense downtrend, the pair appears to be close to getting at least a relief bounce. The development of the bullish divergences on RSI and MFI indicators is also pointing toward this possibility. However, the broader USD/JPY forecast remains quite bearish.
USD/JPY Technical Analysis
Another reason why there is a strong probability of a bounce from current levels is the fact that the price is retesting a previous resistance level, which may now act as a support. Therefore, I would be very careful in shorting JPYUSD at these levels.
