Introduction
Japanese Yen Futures (6J) are trading at 0.006584, up slightly in recent sessions after bouncing from multi-month lows. The break above the 50-day SMA (0.0064998) and a test of the 200-day SMA (0.0065950) call on bulls to continue the buying pressure to push prices back to 0.00718. However, the broader trend remains bearish as the U.S. dollar continues to strengthen and the Japanese economy weakens.
Macroeconomic drivers affecting USD/JPY
U.S. Dollar Strength from Hawkish Fed Stance
- The Federal Reserve’s latest statements suggest higher interest rates for a longer period, reinforcing demand for the U.S. dollar.
- U.S. economic data, including better-than-expected job numbers, has fueled speculation that the Fed may delay rate cuts, keeping the dollar supported.
Bank of Japan’s Dovish Policy & Weak Economic Data
- The Bank of Japan (BOJ) has maintained ultra-loose monetary policy, showing no immediate signs of tightening.
- Recent data has indicated slower wage growth and weaker inflation, reducing expectations for any major policy shifts.
- The Japanese economy faces recession risks, further weighing on the yen.
Risk Sentiment and Carry Trade Flows
- Investors are continuing to favor dollar-denominated assets due to higher yields, leading to capital outflows from Japan.
- The yen’s weakness has been exacerbated by carry trades, where traders borrow yen to invest in higher-yielding currencies.
Technical analysis overview
Breakout Above the 50-Day SMA
- Price reclaimed the 50-day SMA (0.0064998).
- The next key test is whether it can sustain above the 200-day SMA (0.0065950).
Major Resistance at 0.0071875
- The upper resistance zone near 0.0071875 is a key level that rejected price action in September 2024.
- If the yen continues higher, this would be a critical inflection point.
Support and Resistance Levels
Resistance Levels (Upside Targets)
0.0065950 (200-day SMA) – Immediate resistance level; a breakout could signal further upside.
0.0068750 – Intermediate resistance from prior price action.
0.0071875 (Major Resistance Zone) – A long-term resistance area that must be cleared for sustained bullish movement.
Support Levels (Downside Targets)
0.0064998 (50-day SMA) – The first major support if price reverses lower.
0.0062500 – 0.0063000 (Major Support Zone) – Strong historical demand area; failure to hold here would confirm continued weakness.
Scenarios to watch
Bullish Case: Breakout Above 200-day SMA
- If price sustains above 0.0065950, it could continue toward 0.0068750, with 0.0071875 as an extended target.
Bearish Case: Rejection at 200-day SMA
- If the yen fails to hold above 0.0065950, it may fall back toward 0.0065000, with a deeper pullback to 0.0062500 if selling intensifies.
Trade setups
Bullish Setup (Breakout Trade)
- Entry: Long above 0.0066000, targeting 0.0068750 – 0.0071875.
- Stop-Loss: Below 0.0065000 to limit risk.
Bearish Setup (Rejection Trade)
- Entry: Short if price rejects 0.0065950, targeting 0.0065000 – 0.0063000.
- Stop-Loss: Above 0.0066250 to protect against a breakout.
