Peter Smith
USD/JPY took a breather on Tuesday, sliding down to around 148.35 after a nice three-day run. But before you start panicking, the bigger picture still looks pretty solid for this pair.
The main story here is the US Dollar flexing its muscles after that weekend trade deal between the US and EU. Officials basically agreed to ease up on tariffs, which killed off some major trade war worries and supply chain nightmares. That's huge for the Dollar.
The US Dollar Index is chilling near its weekly high around 98.67, showing just how confident traders are feeling about the greenback right now. This week's big events are the Fed meeting on Wednesday and the Bank of Japan meeting on Thursday. Nobody expects rate changes, but traders will be hanging on every word for hints about what's next.
Today we get the US JOLTS Job Openings data for June at 14:00 GMT. Economists think we'll see about 7.55 million job postings – not earth-shattering, but it'll give us another piece of the economic puzzle.
USD/JPY Technical Picture Looks Bullish
The charts are telling a pretty interesting story right now. USD/JPY is bumping up against resistance around 148.60, which is part of an Ascending Triangle pattern that started back at the April low near 139.90.
Here's what's got bulls excited: the 20-day EMA is sloping higher near 147.04, and that's usually a good sign that the trend has legs. When that moving average starts pointing up, it often means more gains are coming.
The RSI is trying to break above 60.00, and if it does, we could see some serious buying pressure kick in. That's the kind of momentum shift that can really get things moving fast.
If USD/JPY can punch through the July 16 high of 149.19, the next targets are 150.00 (that big psychological level everyone watches) and then 151.20 from back in March.
USD/JPY Downside Risks Stay Limited
Sure, nothing goes straight up forever, but the downside looks pretty limited right now. The key level to watch is 145.85 – that's the July 24 low. If we break below that, then we might see a trip down to 144.22 (July 7 low) and maybe even 143.45 (July 3 low).
But honestly, with the Dollar this strong and the technical setup looking this good, you'd need some pretty bad news to push USD/JPY down to those levels. The Ascending Triangle and that rising EMA are basically screaming "higher prices ahead."
The Fed and BoJ meetings could shake things up, but unless we get some major surprises, this pair looks like it wants to go higher. That US-EU trade deal took a lot of worry off the table, and the Dollar Index sitting near weekly highs gives USD/JPY the fuel it needs to keep climbing.
Bottom line: 148.35 might be a temporary pit stop, but the road signs are all pointing toward 150.00 and beyond.
Peter Smith
