Refreshes multi-week high, bulls retain control above 61.8% Fibo.

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  • USD/JPY scales higher for the third successive day and climbs to a fresh three-week high.
  • The BoJ's unscheduled bond-buying operation weighs on the JPY and offers some support.
  • A modest USD strength also contributes to the positive move and favours bullish traders.

The USD/JPY pair builds on its solid recovery from the 138.00 mark touched in the aftermath of the Bank of Japan's (BoJ) policy tweak and gains some follow-through traction for the third successive day on Tuesday. The momentum lifts spot prices to a fresh three-week high, around the 142.80 region during the Asian session and is sponsored by a combination of factors.

The Bank of Japan's unscheduled operation on Monday to buy ¥300 billion ($2 billion) worth of Japanese government bonds (JGB) for the first time since February 2022 continues to weigh on the Japanese Yen (JPY). The US Dollar (USD), on the other hand, climbs to its highest level since July 10 and remains well supported by expectations for one more 25 bps rate hike by the Federal Reserve (Fed) in September or November. This, in turn, is seen as a key factor acting as a tailwind for the USD/JPY pair.

From a technical perspective, the overnight breakthrough a resistance marked by the 200-period Simple Moving Average (SMA) on the 4-hour chart and a daily close above the 142.00 round figure was seen as a fresh trigger for bullish traders. A subsequent strength beyond the 61.8% Fibonacci retracement level of the June-July downfall – from levels just above the 145.00 psychological mark – validates the constructive setup and supports prospects for a further appreciating move for the USD/JPY pair.

Hence, some follow-through positive move beyond the 143.00 round-figure mark, towards testing the next relevant hurdle near the 143.50-143.55 horizontal zone, looks like a distinct possibility. The upward trajectory could get extended further towards reclaiming the 144.00 mark, also representing a strong support breakpoint, now turned resistance.

On the flip side, the Asian session low, around the 142.20 area, now seems to protect the immediate downside ahead of the 142.00 mark or the 61.8% Fibo. level. This is followed by the 200-period SMA on the 4-hour chart, currently around the 141.70 region, which should now act as a pivotal point for the USD/JPY pair. A convincing break below should pave the way for further gains and lift spot prices back towards the 50% Fibo. level, around the 141.20 region, en route to the 141.00 round figure.

Any further decline is more likely to attract some buyers and remain limited near the 140.30-140.25 region, or the 38.2% Fibo. level. This is followed by the 140.00 psychological mark, which if broken decisively will shift the bias in favour of bearish traders. The downward trajectory could then get extended and drag the USD/JPY pair further towards the 23.6% Fibo. level, around the 139.10-139.00 region.

USD/JPY 4-hour chart

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