Japanese Yen Short-term Outlook: USD/JPY Rally Stalls at Intervention Zone

Japanese Yen Technical Forecast: USD/JPY Short-term Trade Levels

• USD/JPY has rallied more than 3.5% from the May lows but is now stalling near the yearly highs.
• Price was rejected from a major resistance zone that has repeatedly capped advances this year / intervention level.
• An outside-day reversal yesterday warns that the multi-week advance may be losing momentum.
• Major event risk next week with the BoJ & Fed rate decisions on tap.
• Resistance 160.37/74 (key), 161.69/95, 163.33 - Support 158.55, 157.70/90 (key), 156.60/67

USD/JPY has surged from the May lows but is now struggling to gain traction at a major resistance zone near the yearly highs. The rejection from this area and the emergence of an outside-day reversal pattern suggest the multi-week advance may be losing momentum as price stretches into previous intervention levels. With the Bank of Japan and Federal Reserve decisions on tap next week, traders are closely watching whether this resistance zone holds or finally gives way. Battle lines drawn on the USD/JPY short-term technical charts.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Yen setup and more. Join live on Monday’s at 8:30am EST.

Japanese Yen Price Chart – USD/JPY Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/JPY on TradingView

Technical Outlook: In last month’s Japanese Yen Short-term Outlook, we noted USD/JPY was trading within, “a tight range at the monthly high and while the near-term technical outlook remains constructive, the threat of intervention looms on this setup. From a trading standpoint, losses would need to be limited to 157.70 IF price is heading higher on this stretch with a close above 160.74 needed to fuel the next major leg of the rally.” The bulls charged higher into the June open with the rally extending nearly 3.6% off the May low.

The advance failed at critical resistance zone this week around 160.37/74- a region defined by the 61.8% extension of the late-January advance, the March & April highs, the yearly high-close and the 2024 high-week close (HWC). The immediate focus is on a reaction at this pivotal zone with and an outside-day reversal candle yesterday suggesting the multi-week uptrend may be vulnerable while below.

Japanese Yen Price Chart – USD/JPY 240min

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/JPY on TradingView

Notes: A closer look at Japanese Yen price action shows USD/JPY continuing to trade within the confines of the ascending pitchfork we have been tracking off the May low. The weekly range is preserved just below resistance ahead of the close on Friday- look for the breakout to offer guidance here. Monthly open support rests at 159.27- note that this level also represents the monthly opening range lows and converges on the lower parallel early next week. A break below this slope would suggest a more significant near-term high is in place and a larger reversal is underway. Subsequent support rests with the 61.8% retracement of the late-April decline at 158.55 and the 2025 high-day close (HDC) / November high at 157.70/90.

A topside breach / daily close above this pivotal zone would validate a breakout of the yearly opening range and expose subsequent resistance objectives at the 2024 high-day close / swing high at 161.69/95 and the 1.618% extension of the 2025 advance at 163.33.

 

Bottom line: USD/JPY is testing major resistance at the objective yearly highs and while the medium-term outlook remains constructive, the advance is vulnerable below this zone with the intervention risk still ever present. Look for a break of Thursday’s range for guidance here. From a trading standpoint, losses would need to be limited to the monthly open IF price is heading higher on this stretch with a close above 160.74 needed to fuel the next major leg of the advance.

Keep in mind the Bank of Japan and Federal Reserve rate decisions are on tap next week. The BoJ is widely expected to raise rates by 25 basis points to bring borrowing costs to the highest levels in more than 30 years. The shift in policy reflects an effort to combat rising inflationary pressures and curb yen weakness. Meanwhile, the focus on the Fed side will be on commentary from newly minted Fed Chair Kevin Warsh. Although the committee expected to leave rates unchanged, the focus will be on the update Summary of Economic Projections on growth, employment, and most notably, inflation. In his inaugural presser, Warsh may also outline changes to way the central bank communicates policy as the Chair looks to implement a new era of Fed governance. Stay nimble into the releases and watch the weekly closes here for guidance. Review my latest Japanese Yen Weekly Forecast for a closer look at the longer-term USD/JPY technical trade levels.

Key Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

Active Short-term Technical Charts

• Swiss Franc Short-term Outlook: USD/CHF Breakout Faces First Major Test
• US Dollar Short-term Outlook: USD Rally Hits Major Resistance Ahead of CPI
• Euro Short-term Outlook: EUR/USD Breaks Key Support After NFP Shock
• Canadian Dollar Short-term Outlook: USD/CAD Rally Hits Major Resistance
• British Pound Short-term Outlook: GBP/USD Recovery Faces Key Breakout Test
• Gold Price Short-term Outlook: XAU/USD Rebounds Hard from Key Support—Is the Bottom In?
• Australian Dollar Outlook: AUD/USD Holds Above Key Support—Breakdown Risk Looms

--- Written by Michael Boutros, Senior Technical Strategist

Follow Michael on X @MBForex