This Week Could Set Long-Term Trend for USD/JPY

This Week Could Set Long-Term Trend for USD/JPY

The USD/JPY has been one of the most dynamic currency pairs in 2022, marked by record highs and intervention from the Bank of Japan (BoJ). However, with the year nearing its close, some key events this week could set the stage for a long-term trend in the pair.

Technical Overview

Short-term bias: The short-term outlook for USD/JPY currently suggests a downtrend, with a series of lower lows seen after the pair peaked at 152.000 in October. This reversal led to the pair breaking below the upward trend channel and retesting the 142.200 zone as resistance. The pair is now consolidating between 138.000 (resistance) and 134.000 (support).

Possible Downside: If USD/JPY breaks below 134.000, the pair could potentially target levels at 133.000, 131.000, and even 127.000 if fundamental factors align with the momentum.

Bullish Crossover: Despite the short-term downtrend, the Know Sure Thing (KST) indicator, a momentum-based oscillator, is showing a bullish crossover. This suggests a potential upside breakout, particularly if the pair can break above 138.000 and close above the mini trend channel. Such a move could indicate that the current downtrend since October is just a pullback, and the long-term bias for USD/JPY might shift back to an uptrend.

Market Events to Watch

• Bank of Japan’s Interest Rate Decision: The BoJ is expected to maintain its negative interest rates, but the key takeaway will be whether the central bank hints at potential tightening in the future, given Japan’s inflation rate of 3.7% in October, with November’s figure expected to reach 3.9%. This could introduce new volatility into the pair.
• Inflation Data: With inflation data for November coming later this week, any significant surprise could add fuel to the fire, further impacting USD/JPY’s direction.

Key Levels to Watch

• Resistance: 138.000
• Support: 134.000

The next few days will be critical for USD/JPY, as the price action could decide whether the pair continues its short-term downtrend or breaks to the upside, potentially setting the tone for 2023.