Japanese Yen Pairs Moving in Opposite Directions

Japanese Yen Pairs Moving in Opposite Directions

The USD/JPY and GBP/JPY pairs have been showing contrasting trends recently, highlighting the volatility in the forex market and the divergence in market sentiment surrounding the Japanese yen.

USD/JPY: Bullish Momentum Returns

After a period of choppy price action in mid-July and August, the USD/JPY pair has shown signs of recovery. The pair dropped to a strong support level of 130.39 before bouncing back with a nearly 2.7% gain last week. This bullish move saw the pair breaking through the 135.000 resistance and rallying up to 136.90.

The Fisher Transform Indicator is signaling a solid bullish trend as the fisher line crosses above the trigger line and moves past the zero line. If the momentum continues, traders may look to target previous highs, such as 137.40, 138.70, and last month’s high around 139.38.

A more optimistic outlook suggests that a new high could be in sight, especially if the US dollar remains strong. However, before reaching those targets, a break above 136.900 is crucial. If the price fails to maintain this momentum, a pullback to the 135.000 support level could occur, potentially setting up a retest of that area.

GBP/JPY: Bearish Trend with Upside Pullbacks

On the other hand, GBP/JPY has been moving in the opposite direction, currently in a downtrend with intermittent upside movements. The Auto Fib Retracement Indicator highlights rejection at the 50% level around 163.60, suggesting the downtrend is intact. The price action is forming lower lows, signaling that further downside is likely, especially if the price breaks below the 160.500 support zone.

For the downtrend to continue, the price needs to break through the 23.6% Fibonacci level before targeting lower levels. A key level to watch is the 159.44 low from August 2, which aligns with the 0% pivot point of the Auto Fib Retracement Indicator. If this support breaks, the pair could see further declines.

Outlook for Both Pairs

While the USD/JPY shows a strong bullish momentum and may continue to target higher levels, GBP/JPY is in a bearish phase, with potential for further downside if key support levels break. Traders will need to monitor these levels closely for signals of trend continuation or reversal, especially in light of upcoming economic events that may influence the Japanese yen and the broader forex market.