US Dollar Consolidating Gains Against Yen

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USD/JPY forex forecast
  • USD/JPY was trading near a critical resistance area this Friday
  • US and China will roll back tariffs in phases if a deal is reached
  • Labor cash earnings and overall household spending above expectations in Japan

The USD/JPY is trading this Friday around the 109.15 level, and according to the current market sentiment, the direction for the pair remains bullish. The US-China trade tensions are still in the center for the investors, but progress has been made in trade negotiations. According to the latest news, the US and China are planning to roll back tariffs in phases once a deal is reached.

Rise in US yields driving the pair higher

The US has moderate economic growth, and the policymakers will probably not cut rates further any time soon. A solid US employment report is keeping US government debt yields in the positive. This has a very good influence on this pair. Still, investors and traders are waiting for information about tariffs removal before they make any big decision.

JPY is bought as a safe-haven currency in times of uncertainties.

Japanese data was generally encouraging this Friday. The country released September labor cash earnings, which went up by 0.8% YoY and up by 9.5% for overall household spending in the same period.

It is important to say that JPY is bought as a safe-haven currency in times of uncertainties. Every bad news that is connected with global political risk will likely result in some demand for the safe-haven yen. This will have a negative influence on USD/JPY.

Technical analysis

USDJPY

USDJPY

The USD/JPY has reached 109.47 this Friday, and the pair is currently trading around the 109.15 level. The US dollar is strengthening this week. According to the current market sentiment, the direction for USD/JPY remains “bullish”.

When we look at the daily chart (one candle is one day period) of this pair, we can see that the major trend is bullish (uptrend).  As long the price is above this trend line, there is no indication of the trend reversal and USD/JPY is in the “buy” zone. 

Background noise and conclusion

The rise in US Treasury yields is driving the USD/JPY higher this trading week, although the pair has lost some value this Friday. According to the fundamental and technical analysis, the major direction for this pair remains “bullish”, and as long the price is above this trend line, there is no indication of trend reversal.

The pair needs to fall below the 108.00 support level to extend moves lower. If the price breaks the strong support level at 108.00, then that would be a strong “sell” signal.

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