USD/JPY Confronts Key Short-Term Resistance

Market Overview

On Monday, November 18, USD/JPY continues its upward climb as the dollar strengthened against the yen. This move reflects a mixed market reaction to comments from Bank of Japan (BoJ) Governor Ueda. While Ueda hinted at potential tightening, his hesitation to commit to a specific timeline left traders uncertain. This hesitation limited the short-term confidence in the yen. The market currently prices a 54% probability of a rate hike by the BoJ in December. However, this uncertainty leaves the yen vulnerable, especially as market participants consider the resilience of the U.S. economy and the potential strength of the dollar. The yen’s direction will largely depend on any concrete actions by the BoJ in the coming months. Until then, the yen remains exposed to further losses against the dollar, particularly given external pressures.

Technical Analysis

On the hourly chart for USD/JPY, the price bounced after testing a one-month ascending trendline, which acted as a strong support, preventing further declines. The bounce, followed by a break above the key resistance at 154.744—which coincides with the 34-period moving average—reinforced the bullish scenario. The price remains above this moving average, indicating stronger upward momentum. If it stays above this level, the primary scenario remains bullish. However, this level may now act as a support, and any retreat will see traders closely watching reactions around this area.

Further resistance levels include Fibonacci extensions at 127.2% (154.993), 161.8% (155.309), 200.0% (155.658), and 241.4% (156.036). If momentum remains robust, breaking through each resistance level could lead to the next.

Oscillators Confirmation

The RSI is currently at 49.72, indicating that the price is near equilibrium between buyers and sellers. The RSI still has room before entering overbought territory, suggesting the potential for further price gains. Meanwhile, the MACD has moved close to positive territory, with a small gap between the MACD line and its signal line—signaling a reduction in bearish momentum and a potential strengthening of the bullish trend.

Alternate Scenario

If USD/JPY fails to sustain above the 154.744 level and selling pressure intensifies, the price could pull back towards the Fibonacci 61.8% support at 154.395 and eventually test the key support at 153.830. A decisive break below this level may indicate waning bullish momentum and the possibility of a deeper correction.

Key Levels

Resistance Levels:

• Resistance 1: 154.993 (127.2% Fibonacci)
• Resistance 2: 155.309 (161.8% Fibonacci)
• Resistance 3: 155.658 (200.0% Fibonacci)
• Resistance 4: 156.036 (241.4% Fibonacci)

Support Levels:

• Support 1: 154.744 (Key resistance turned support)
• Support 2: 154.395 (61.8% Fibonacci)
• Support 3: 153.830 (Key support level)

Key Events to Watch

Several major economic events this week could impact the USD/JPY pair. On Tuesday, November 19, U.S. housing data will take center stage. Building permits and housing starts are projected to be 1.44 million and 1.34 million, respectively. Better-than-expected data could signal resilience in the U.S. economy, supporting further gains in USD/JPY.

On Wednesday, November 20, the U.S. trade balance is set to be released, with expectations pointing to a deficit of $0.15 trillion. A lower trade deficit is generally seen as positive for the dollar. Additionally, speeches from Federal Open Market Committee (FOMC) members may offer clues about future policy directions. Any indication of continued hawkish policies could further boost the dollar.

Thursday, November 21, will bring the initial jobless claims data and the Philadelphia Fed Manufacturing Index. Initial claims are expected to come in at 220,000. A figure lower than this could highlight the robustness of the U.S. labor market and lend support to the dollar. Although the Philly Fed index is expected to fall from 10.3 to 6.3, this may have a muted effect given stronger data elsewhere.

Finally, on Friday, November 22, Japan’s National CPI is expected at 2.2%, down from the previous reading. This indicates a lack of inflationary pressure, which may keep the BoJ on an accommodative path, ultimately favoring further gains for USD/JPY.

Conclusion

USD/JPY remains in a bullish trend, supported by the bounce from the one-month trendline and a break above key resistance. Further upward movement may be seen if the pair continues to trade above 154.744, with potential targets at 154.993 and beyond. Key economic data this week will be crucial in determining whether the pair sustains its momentum or faces a corrective pullback.