USDJPY: Bullish Breakout Potential Ahead of US CPI Data Analysis

USDJPY: Bullish Breakout Potential Ahead of US CPI Data Analysis

The USDJPY pair is currently aiming for a bullish breakout as it approaches Thursday’s US CPI data. Although momentum indicators suggest positive sentiment, caution should be exercised due to conflicting trend signals. On Tuesday, USDJPY found new buyers near its 20-day simple moving average (SMA) at 143.40, resulting in a mild positive close for the day.

Upside pressures continued on Wednesday, with the pair testing the important resistance level at 144.70. This level coincides with the 38.2% Fibonacci retracement of the previous downleg. If USDJPY successfully breaks above this border, it could pave the way for an extension towards the psychological level of 146.00 and the 50-day SMA. Furthermore, surpassing this level could open doors for a potential move towards the 61.8% Fibonacci mark at 147.45.

The RSI and MACD indicators demonstrate a positive signal, indicating an improvement in buying confidence. However, it is crucial to note that negative risks still persist. The pair is currently struggling to overcome its 200-period SMA on the four-hour chart. Additionally, the bearish crossover between the 20- and 200-day SMAs, along with the narrowing gap between the 50- and 200-day SMAs, suggests that the recent rebound may not be sustainable. Therefore, close attention should be paid to the 20- and 200-day SMAs as decisive movements may indicate a shift in the market sentiment.

Should the bears succeed in breaching support at 143.00, they could revisit the broken resistance trendline from November’s highs, approximately at 141.35. In the event that the previous downtrend resumes and the price falls below 140.80, the next level of support could be found near the 2023 support trendline at 139.60. These possible bearish scenarios need to be taken into consideration.

Conclusion: Bullish Potential if 144.70 Level is Broken

To summarize, if the 144.70 area is successfully breached, USDJPY could potentially progress to higher levels in the coming trading sessions. The positive momentum indicators provide encouragement for a bullish breakout. However, it is important to remain cautious due to the conflicting trend signals. Traders should closely monitor the behavior of the 20- and 200-day SMAs as well as key support levels to determine the sustainability of any upward momentum. The upcoming US CPI data release may also provide impetus for further market movements.

Technical Analysis

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