Japanese Yen Weekly Forecast: Bearish
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As expected, the Japanese Yen continued losing ground to the US Dollar and British Pound this past week. USD/JPY confirmed a breakout above peaks from June, extending gains to touch new highs for this year so far. From a fundamental standpoint, rising longer-term Treasury yields pointed to a Federal Reserve that may keep rates higher for longer down the road.
This is damaging to the Japanese currency amid a mostly static Bank of Japan, leaving the exchange rate vulnerable to external developments rather than what is going on domestically. With that in mind, what is the technical landscape shaping up to be for USD/JPY and GBP/JPY?
USD/JPY is still facing fading upside momentum, which can be seen by observing negative RSI divergence on the daily chart. This is cautiously undermining the recent upside breakout, placing the focus on 145.07 for immediate support. Below that is the 20-day Moving Average (MA). The latter could hold as support, maintaining the upside focus.
Otherwise, extending gains from here places the focus on the 61.8% Fibonacci extension level at 148.27 and towards peaks from last year.
of clients are net long. of clients are net short.
| Change in | Longs | Shorts | OI |
| Daily | -9% | 4% | 1% |
| Weekly | -2% | 2% | 1% |
USD/JPY Daily Chart
Chart Created in TradingView
GBP/JPY also remains in a similar situation. The exchange rate confirmed a breakout above peaks from June, allowing the pair to touch new highs for this year so far. Unlike USD/JPY, GBP/JPY is trading around peaks since late 2015.
Key resistance from here remains the November 2015 high at 188.81. Beyond that sit the midpoint and 61.8% Fibonacci extension levels at 190.65 and 194.03, respectively.
In the event of a turn lower, the 50-day Moving Average may hold as key support, maintaining the broader upside focus. But, getting there entails first clearing the June high of 184.01.
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GBP/JPY Daily Chart
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— Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com