USD/JPY Eyes June High Ahead Of FOMC Amid Recovery In US Yields


Image of USD/JPY daily chart

Source: Trading View

  • USD/JPY approached pre-pandemic levels as a ‘golden cross’ materialized in March, with a bull flag formation unfolding during the same period as the exchange rate traded to a fresh yearly high (110.97).
  • The Relative Strength Index (RSI) showed a similar dynamic as the indicator climbed above 70 for the first time since February 2020, but the pullback from overbought territory has negated the upward trend from this year, which pushed USD/JPY below the 50-Day SMA (109.10) for the first time since January
  • Nevertheless, USD/JPY reversed ahead of the March low (106.37) to largely negate the threat of a head-and shoulders formation, with the exchange rate breaking above the left shoulder in May.
  • Since then, USD/JPY has climbed back above the 50-Day SMA (109.10) to take out the May high (110.20), with the break/close above the close above the Fibonacci overlap around 109.40 (50% retracement) to 110.00 (78.6% expansion) opening up the March high (110.97).
  • Next area of interest comes in around 111.10 (61.8% expansion) to 111.60 (38.2% retracement) followed by the overlap around 112.40 (61.8% retracement) to 112.80 (38.2% expansion).
  • However, USD/JPY may threaten the opening range for June if it struggles to hold above the Fibonacci overlap around 109.40 (50% retracement) to 110.00 (78.6% expansion), with a move below the 50-Day SMA (109.17) opening up the 108.00 (23.6% expansion) to 108.40 (100% expansion) region.
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