Yen. Image Source: Pixabay

USD/JPY Analysis

• The U.S. dollar appears to be dictating terms, but the big, fundamental week ahead could change fortunes.
• Technical analysis maintains the 140.00 inflection point as important for short-term directional bias.

Japanese Yen Technical Forecast: Mixed

The Japanese yen looks to end the week on a high note considering the lower volatility created by the U.S. Thanksgiving holiday. In conjunction with the lesser market action, the U.S. dollar has been under pressure after the FOMC minutes that reiterated moderating interest rate hikes.

Next week will be largely focused on the U.S. with high impact events scattered throughout the week (see economic calendar). The core inflation print and Non-Farm Payroll (NFP) will be the highlights, and they could support the current ‘moderation’ narrative or move against it, giving hope to USD/JPY bulls.

Economic Calendar

Source: DailyFX economic calendar

Technical Analysis - USD/JPY Daily Chart

Chart prepared by Warren Venketas, IG

The daily USD/JPY chart shows price action sandwiched between the 137.67 swing low and the 140.00 psychological resistance handle. Although the Relative Strength Index (RSI) has recently come out of the oversold zone, the response to the FOMC minutes could spark a change in investor sentiment towards the dollar.

This could mean looking for downside as soon as the greenback shows some appreciation. The week ahead will be focused on the fundamental catalysts mentioned above and the market reaction around the key 140.00 zone. A weekly close next week above or below 140.00 could spark short-term directional bias considering the amount of data being digested.

Key resistance levels:

• 142.25.
• 140.00.

Key support levels:

• 137.67.
• 135.00.

IG Client Sentiment Points to Short-Term Downside

IG client sentiment shows that retail traders are currently net short on the USD/JPY pair, with 52% of traders currently holding short positions (as of this writing). At DailyFX, we take a contrarian view on sentiment. However, due to recent changes in long and short positioning, we favor a bullish bias.

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