- USD/JPY trades with weak momentum slightly below the critical 160 level
- Overbought conditions detected; sellers wait below 158.35-159.00
- BoJ intervention is possible; US core PCE inflation due on Friday at 12:30 GMT
Following a constructive week, USD/JPY is now hovering just below its 34-year high of 160.20, having surpassed April’s limit of 158.34 and a crucial resistance line.
The price has been facing resistance near 159.80 over the past couple of days and with the technical indicators sending overbought signals, the bulls might experience a tough session ahead. However, if the pair continues to defend itself around the 159.00 round level, hopes for another upturn may not completely fade.
A decisive move above the 160.20 peak could last till the 162.75-163.10 region, where the rising constraining lines from January and March are located. Then the door could open for the 164.00 psychological mark or the 161.8% Fibonacci extension of May’s downfall around 165.35.
Conversely, a drop below 159.00 could potentially lead to a retest of April’s limit at 158.34. A violation there would change the short-term outlook from bullish to neutral and likely force a decline towards the 20-day simple moving average (SMA) at 157.50. The 157.00 trendline zone could next challenge the bears, while lower, the 50-day SMA and the ascending trendline from May could prevent a sharp downfall to 156.35.
Overall, USD/JPY has entered a caution zone, increasing the likelihood of a downside correction. Yet, the outlook would only be downgraded if the price falls below 158.34-159.00.