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USDJPY Builds Upside Momentum But Can It Test Critical Resistance?

USDJPY is up 0.06% during the mid-morning London trading session on Monday, going for 150.62 at the time of writing. The pair went down marginally on Friday, but faced rejection at 150.77. Falling yields on the five-year and ten-year US treasuries have slowed down gains by USDJPY. Therefore, fresh impetus is required from elsewhere to avoid sideways action.

Verbal intervention by BoJ officials put a lid on the dollar’s advances over the past week. However, the new week presents new challenges for the yen, considering that the dollar has started on the front foot. A break past the 150.80 psychological level could, particularly renew the bulls’ push towards the 151.00 mark, at which point the BoJ could need to go beyond verbal intervention.

A depreciating yen is one of the leading reasons behind Japan’s surprise recession in the last quarter. However, the BoJ has prioritized economic recovery over tackling inflation. In the meantime, the long-running ultra-low interest rate policy continues to be counterproductive.

The USDJPY market will have another opportunity to react to macroeconomic data from Japan and the United Stated on Monday. The US Census Bureau will be the first to release its readings on Building Permits and New Home Sales. A rise in the figures will be seen as bullish for the dollar, while a decline will be bearish. The US recorded a rise in New Home Sales from 615,000 to 664,000 during the last reading, and that figure is projected to rise to 680,000 in today’s release.

Technical analysis

The momentum on the 30-minute USDJPY price chart favours upside momentum, with the pivot at 150.51. Control by the bulls above the pivot will likely break the 150.68 resistance, with further gains potentially testing 150.75. However, if the bulls give up control below 150.51, the bears could break 150.45. This will invalidate the bullish view and see the support move to 150.31.