USDJPY, Time frame: Weekly, Tools: SMA 100USDJPY, Time frame: Weekly, Tools: SMA 100

Technical analysis of the USDJPY:

Looking at the USDJPY chart, there are three key levels worth watching: 163, 152, and 140. The 163 level represents a major resistance zone that the pair has reached on two previous occasions. It also stands as a historically significant resistance level, near the highest levels seen in approximately 40 years.

On the other hand, the area around 140 represents a major support zone. Over the past three years, the pair has bounced from this area on three previous occasions. Now, we come to the most important level: 152. This is the key dividing line between the potential continuation of USDJPY’s upside and a possible decline toward the 140 level.

First, 152 represents roughly the midpoint between 163 and 140, in other words, the 50% Fibonacci retracement level. It also represents the 100-week average price, making it a key dynamic support area. Finally, it has acted as a reversal zone on several occasions, as shown on the accompanying chart.

Fundamentals of the USDJPY:

Despite interventions by the Bank of Japan and the US Federal Reserve in the foreign exchange market, and despite Japanese interest rates rising to 1.25%, their highest level since 1995, the narrowing expectations for a Japanese rate hike this month mean that the interest rate differential between the US and Japan will continue to favor the US dollar.  At the same time, annual inflation in Japan has accelerated at its fastest pace in 10 months, reaching 2.7%, increasing the focus on keeping inflation from moving beyond its target levels.