Japanese Yen Short-term Outlook: USD/JPY Three-Week Surge Stalls – Breakdown Risk Builds

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

• USD/JPY rebounded more than 4% from the February low before stalling at layered resistance near prior swing highs.
• The pullback is now testing channel support, placing near-term structure at risk as the multi-week advance loses momentum- risk for inflection here.
• Key event risk on tap with US CPI & PPI slated for tomorrow and Friday, respectively.
• Resistance 158.44/88 (key), 159.46, 160.22 - Support 156.37/67 (key), 155.59, 154.79/80

USD/JPY has cooled after an aggressive three-week advance that carried the pair back toward major resistance. Momentum improved during the rally, but buyers were unable to sustain gains at key highs, leaving price vulnerable as it slips toward the lower boundary of its ascending structure. With the weekly opening range now in focus, the market approaches a decision point. A break lower would shift attention toward deeper retracement levels, while renewed strength above resistance would signal continuation toward the yearly highs. Battle lines drawn on the USD/JPY short-term technical charts.

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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 that USD/JPY was, “approaching pivotal support near the January lows, and the focus is on possible inflection into this zone in the days ahead. From a trading standpoint, rallies should be limited to 154.79 IF price is heading for a break on this stretch..” USD/JPY rebounded just ahead of the January lows the following day with the subsequent rally surging more than 4.3% off the February low. The rally exhausted into resistance yesterday and the focus is on possible inflection off this zone with the multi-week advance vulnerable while below.

Japanese Yen Price Chart – USD/JPY 240min

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

A closer look at Japanese Yen price action shows USD/JPY trading within the confines of an ascending channel formation with today’s pullback testing support at the lower parallel and the 2025 high-day close (HDC) near 157.70. A break / daily close below this slope would threaten a larger pullback toward 156.37/67- a region defined by the 38.2% retracement of the February rally, the 61.8% retracement of the year-to-date range, and the 2026 yearly open. Looking for a larger reaction there IF reached. Losses below this level would suggest a more significant high is in place and a larger reversal is underway with subsequent support objectives eyed at the monthly open at 156.05, the 50% retracement at 155.59, and the 61.8% retracement / February open at 154.79/80.

Key resistance remains at the January high-day close and the 2025 swing high at 158.44/88. A topside breach / close above this threshold would mark resumption of the broader uptrend toward subsequent resistance objectives at the yearly high near 159.45 and the April 2024 high at 160.22. Note that this level converges on channel resistance into the close of the week- look for a larger reaction there IF reached.

 

Bottom line: The USD/JPY is testing near-term uptrend support here after responding to key resistance yesterday. The immediate focus is on a potential breakout of the weekly opening-range with the long-bias vulnerable while below the highs. From a trading standpoint, losses would need to be limited to 156.37 IF price is heading higher on this stretch with a close above 158.88 needed to fuel the next major leg of the advance.

Keep in mind we get the release of key inflation data over the next few days with the February Consumer Price Index (CPI) on tap tomorrow and the January Personal Consumption Expenditures slated for Friday. With the surge in oil prices fueling inflation concerns, the focus will be on this latest pre-war update as traders continue to reprice the outlook for monetary policy. Last week’s dismal NFP print puts the central bank back on the ropes as the downside risk to employment is countered by the upside risk to inflation. Fed Fund Futures are now pricing a 58% probability the next interest rate cut will be delivered in July. Stay nimble into the release and watch the weekly close 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.

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--- Written by Michael Boutros, Senior Technical Strategist

Follow Michael on X @MBForex