Japanese Yen Technical Analysis: USD/JPY, EUR/JPY, GBP/JPY

Japanese Yen Talking Points:

• USD/JPY continued to defend the 155.00 handle this week, even as the BoJ hiked rates on Thursday.
• EUR/JPY and GBP/JPY both put in strong bullish weeks as the former tested the 160.00 level and the latter the 190.00 level.
• For next week Japanese CPI is in the headlines on Thursday afternoon, and there’s also rate decisions from Canada, the U.S. and Europe on the radar ahead of that inflation data.
• I’ll be looking into all three pairs during this week’s webinar on Tuesday.

Video

It’s been a ranging week in the major FX pair of USD/JPY even as the Bank of Japan pushed another rate hike. While fears of carry unwind loom large given last year’s sell-off that bottomed in September, the USD/JPY pair remains well-elevated and this week saw two different instances of support holding at the 155.00 psychological level.

Last night was an especially vivid support test around that rate hike announcement, as we can see six hours of support in the 155.00-155.38 zone before bulls were ultimately able to push prices higher, showing a counter-intuitive response to what many were expecting to be a driver of JPY-strength.

USD/JPY Hourly Price Chart

USD/JPY Daily

From the daily chart with a few hours to go ahead of the end of the week, we can see where the daily bar is showing indecision, even with that rate hike coming from the Bank of Japan. This also highlights the fact that this week has been mean-reverting, with prices holding between support at 155.00 and resistance at 156.67, which is the 76.4% Fibonacci retracement of the July-September sell-off from last year.

Deductively, this is of interest as this is like the market shrugging off bad news to hold with strength and a higher-low. But, for next week it’s probably going to be that FOMC rate decision and the CPI data from Japan that will set the tone. For overhead resistance, there’s the 157.17 Fibonacci level followed by the prior swing-high of 158.88. And above that, it’s the 160.00 level that looms large. For support, it’s the 153.41 level as this is the 61.8% retracement of that same major move from last year, and below that is a major decision point from 150.00-151.95.

But, at this stage bulls have held the line and that fact should be respected until something changes in the backdrop of price.

USDJPY AD

USD/JPY Daily Price Chart

EUR/JPY

In the video on Wednesday I showed where bullish price action in EUR/JPY and GBP/JPY didn’t seem too perturbed by the expected rate hike from the Bank of Japan.

That price structure was on full display around the rate hike announcement: The 163.21 prior high brought a sizable pullback, all the way until support at 162.04 came into play and helped to hold the lows. That then brought bulls back into the matter as fresh highs formed, with price running all the way up to a descending trendline confluent with the 163.90 level.

EUR/JPY Two-Hour Price Chart

EUR/JPY Daily: The Resistance Test

That descending trendline originates from last October’s swing-high and connects to the December 27^th swing-high. The point of confirmation was the high on January 7^th and, so far, that’s what’s held bulls back as you can see from the shorter-term chart above.

The question now is whether that resistance and higher-high can run into another higher-low and for that, the 163.21 level is of interest as that was a clean spot of support on two separate occasions last week. If that doesn’t hold, then 162.04 is the next level of note and if that fails, then it’s going to look more and more like we’re seeing continued digestion within the longer-term triangle, and that would point to the possibility of another 160.00 test and that would be the third such instance in early-2025 trade, which may not be treated as friendly as the prior two. But, for now, bulls have put up a good show and that trend should remain respected until price demands otherwise.

EUR/JPY Daily Chart

GBP/JPY

The rally in GBP/JPY has shown as an even stronger move and as the weekly close fast approaches bulls are continuing to drive towards the 195.00 psychological level.

This is even more impressive when considering where support was just a week ago, at the trendline on the 190.00 handle that I had looked at in last week’s video.

Like the two above pairs, there was whip around last night’s rate hike announcement and in GBP/JPY, resistance showed at 193.61, a key long-term level, and support showed up just above the 192.00 handle as bulls then took over and drove to fresh highs.

GBP/JPY Four-Hour Price Chart

GBP/JPY Longer-Term

That trendline that came into play last Friday was a big spot, and it was confluent with the 190.00 handle at the time. That trendline originates in September of 2022 and connects to the September 2024 low, the projection of which caught the low in early-December. At the time, it was confluent with the 38.2% retracement of the 2023-2024 trend in the pair but that point of confirmation delivers some validation of the trendline, and that was continued from the more recent support test.

The big test now is the 195.00 level, and whether bulls in GBP/JPY can stoke a larger trend of continuation – or whether the bounce from 190 has been a mere oversold snap-back move after a confluent zone of support came into play.

Above 195.00 is the 195.66 level, as this is the 23.6% retracement of the same major move that generated the 38.2% level that was confluent with the December trendline inflection.

GBP/JPY Weekly Price Chart

--- written by James Stanley, Senior Strategist