USD/JPY, GBP/JPY Establish and Reinforce Resistance

Japanese Yen Weekly Forecast: Bearish

• JPY Showed some resilience last week
• Still, currencies remain bearish overall
• USD/JPY and pound/yen stay focused upwards

The Japanese Yen fell slightly against the US Dollar last week, but a closer look reveals that the US Dollar/Yen is struggling to extend its overall uptrend. Not long ago, the exchange rate was holding resistance at 146.56. This opened the door to a resumption of the uptrend following a breakout of the June high of 145.07.

Since then, the price has stagnated somewhat and a negative RSI divergence has emerged. The latter is likely to occur before the uptrend is waning and the downtrend takes place. The US dollar/yen pair also remains above the 20-day moving average (MA) and the long-term uptrend line from March. As such, the Japanese yen remains generally bearish against the US dollar despite the short-term price action.

USD/JPY daily chart

Charts created with TradingView

The British pound faces a somewhat similar situation against the Japanese currency. GBP/JPY broke out of the June high of 184.01 but rose slightly to establish new resistance at 186.76. It then turned down towards the June highs. This followed the emergence of his RSI divergence in the negative, warning that the momentum was not maintained.

Currently, the pair is facing the 50-day moving average as short-term support. The latter has helped maintain a broader bullish technical bias for GBP/JPY. A break below this could revisit the July low of 176.33. Otherwise, any further upside will focus on the November 2015 high of 188.81. It is then located at the midpoint of the Fibonacci extension, 190.65.

GBP/JPY daily chart

Charts created with TradingView

— By Daniel Dubrowski, Senior Strategist, DailyFX.com