USD/JPY, EUR/JPY, Japanese Yen Talking Points:
- The Japanese Yen demonstrated notable strength against both the US Dollar and the Euro, continuing this trend into the beginning of last week.
- Both currency pairs established new lows on Tuesday and have been in a corrective phase since. The key question is whether these broader bearish trends will maintain lower-high resistance or if bullish momentum can break through the 160.00 level in EUR/JPY and challenge 151.95 in USD/JPY.
- I will analyze these pairs across various time frames in the upcoming weekly webinar. Feel free to join: Click here for registration information.
After a series of declines in the initial month and a half of Q4 trading, JPY strength began to emerge a few weeks ago, leading to a robust start in December. The currency showed particularly strong performance against the Euro after holding lower-high resistance just below the 165.00 mark. Last week, EUR/JPY recorded a new two-month low at the 156.41 Fibonacci level, aligning with a trendline drawn from the August and September swing-lows.
In my previous article and video, I highlighted the potential for this pullback, which was marked initially by a doji on the daily chart, followed by a rally toward the psychological level of 160.00.
EUR/JPY Daily Price Chart
In my last analysis, I pinpointed several resistance levels, identifying 160.00 as a significant area of interest. The nearest resistance previously identified was a zone between 158.04 and 158.24, which initially obstructed the trendline rebound but was later overcome and turned into support shortly after the weekly open.
This setup has led to an advance toward the 160.00 level, which is currently acting as resistance, with the previous swing high of 160.34 marking a delineation within this resistance zone.
According to the daily chart above, this might be an optimal location for lower-high resistance to be established, should the bears wish to maintain control over the trend. The 159.10 level remains a focal point for support, followed by the earlier identified zone of 158.04-158.24.
Additionally, should prices break above the psychological level of 160.00, deeper resistance could be found at 160.55, 160.90, and 162.00, each holding some potential significance.
EUR/JPY Four-Hour Price Chart
USD/JPY Analysis
While EUR/JPY is addressing a critical resistance level, USD/JPY is further removed from the prior levels of interest. The 151.95 mark is notable as it was the high in Q4 of both 2022 and 2023, subsequently acting as support in May of this year. This price point is also in alignment with the 200-day moving average, which maintained the lows in November right before election results, briefly showing as resistance when prices were declining late last month.
This remains a pivotal point for USD/JPY. Similar to 160.00 in EUR/JPY, it represents a key area for sellers to defend against a lower-high resistance if they wish to control the trend.
USD/JPY Daily Price Chart
Short-Term Outlook for USD/JPY
In the short term, the 150.77 level stands out as a crucial marker. This level represents the 50% retracement mark from the Fibonacci setup that initiated the highs in mid-November. The 61.8% retracement had previously provided support as the price formed a descending triangle. The 50% retracement at 150.77 caught the lows during the initial break, leading to an upward bounce towards the 151.95 level and the 200-day moving average, ultimately failing to hold resistance early last week before bears attempted to test the 150.00 mark.
This activity has established higher-low support potential, setting the stage for a possible test of the 151.95 resistance level. Should bulls manage to breach this level, prior support at the 61.8% retracement level of 153.41 would likely become the next significant resistance point for sellers wanting to maintain their influence over intermediate-term market dynamics.
USD/JPY Four-Hour Price Chart
--- authored by James Stanley, Senior Strategist
