USD/JPY Bullish Series Faces Range Resistance

Japanese Yen Talking Points

USD/JPY appears to be creation another try to exam a May-high (111.40) as it extends a bullish method from progressing this week, yet a singular greeting to a uninformed information prints entrance out of a U.S. economy might encourage range-bound conditions amid easing expectations for 4 Fed rate-hikes in 2018.

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USD/JPY Bullish Series Faces Range Resistance

Image of daily change in USDJPY

The new developments might do small to change a opinion for financial process as U.S. Personal Spending increases 0.2% in May contra projections for a 0.4% print, while a core Personal Consumption Expenditure (PCE), a Fed’s elite sign for inflation, climbs to an annualized 2.0% from 1.8% in April.

Even yet a Federal Open Market Committee (FOMC) appears to be on march to serve normalize financial process over a entrance months, negligence expenditure interconnected with worsening cost pressures might expel a enervated opinion for a economy as it impedes on a purchasing energy for U.S. households and businesses. Moreover, a flourishing hazard of a global trade war might turn a flourishing regard for a executive bank as Atlanta Fed President Raphael Bostic, a voting-member on a 2018 FOMC, warns business contacts within a sixth district of a Federal Reserve complement are ‘extremely endangered about a prospects of a trade war.’

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With that said, Chairman Jerome Powell and Co. might continue to plan a neutral Fed Funds rate of 2.75% to 3.00% as ‘the Committee expects that serve light increases in a aim operation for a sovereign supports rate will be unchanging with postulated enlargement of mercantile activity, clever labor marketplace conditions, and acceleration nearby a Committee’s symmetric 2 percent design over a middle term,’ and a singular operation for an extended hiking-cycle might furnish range-bound conditions in USD/JPY generally as a Bank of Japan (BoJ) pledges to change a financial process opinion in mercantile year 2019.

Keep in mind, a broader opinion for USD/JPY stays constructive as both cost and a Relative Strength Index (RSI) lane a ceiling trends from progressing this year, yet a span might mostly connect forward of a subsequent FOMC assembly on Aug 1 amid a fibre of unsuccessful attempts to exam a May-high (111.40).

USD/JPY Daily Chart

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  • The new array of aloft highs lows might coax a run during a 111.10 (61.8% expansion) to 111.60 (38.2% retracement) region, yet disaster to break/close above a Fibonacci overlie might beget range-bound conditions in USD/JPY as a bullish movement from progressing this year appears to be abating.
  • Need a pierce next a 109.40 (50% retracement) to 110.00 (78.6% expansion) segment to open adult a reduce end of a near-term range, with support entrance in around 108.30 (61.8% retracement) to 108.40 (100% expansion), that sits only above a May-low (108.11).

For some-more in-depth analysis, check out a Q2 Forecast for a Japanese Yen

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— Written by David Song, Currency Analyst

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