The USD/JPY pair has experienced significant volatility recently, with shifts driven by policy speculation and global economic trends. Last week, the US Dollar surged to a two-year high, but USD/JPY showed a notable divergence, forming a lower high instead.
The Bank of Japan’s (BoJ) upcoming policy review could introduce a more hawkish stance, further impacting the pair. However, despite this potential shift, the USD/JPY remains supported by key technical levels.
In July, USD/JPY traded above 160.00, only to decline sharply following disappointing US CPI data and a subsequent BoJ intervention. The pair eventually found support at 140.00 in September, aligning with the Federal Reserve's first rate cut.
Following this, USD/JPY initiated a recovery, retracing 76.4% of its July-August sell-off. The pair continued its bullish trend through October and early November, driven by a robust US Dollar rally after the US Presidential Election.
Currently, USD/JPY is holding above significant support zones, including the 61.8% Fibonacci retracement at 151.95 and the 200-day moving average. These levels are crucial as they align with historical price actions, such as the BoJ’s previous defense of 160.00.
On the downside, the 150.00 psychological level remains a key focus. Below that, further supports at the 50% Fibonacci retracement offer additional layers of stability.
In the short term, USD/JPY is forming a descending triangle pattern, with support around the 153.41 and 153.75 levels. Last week’s lower high, despite the US Dollar’s strength, highlights bearish divergence.
If sellers break through the 151.95 support, it could signal further bearish momentum. However, until critical supports are decisively breached, a sustained reversal remains unlikely.
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