USD/JPY Forecast: Further gains likely once above 110.45

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USD/JPY Current price: 110.29

  • Market players are waiting for the ECB’s decision on monetary policy.
  • Stocks, and government bond yields consolidate near their weekly highs.
  • USD/JPY has room to extend its gains, but additional confirmations are needed.

The USD/JPY pair consolidates in the 110.20/30 price zone, as financial markets hold stable ahead of the main event of the week, the European Central Bank monetary policy decision. Investors are optimistic but cautious, with stocks up and government bond yields hovering near weekly highs.

Regarding the ECB, market players anticipate a dovish event. President Christine Lagarde is expected to announce fresh forward guidance after the latest strategic review, which defined a new symmetrical target for inflation at around 2%. Nevertheless, no changes are seen in rates and/or the financial programs. Moreover, the ECB would likely extend the PEPP amid persistent pandemic-related risk.

Japan celebrated a holiday, which means it did not publish macroeconomic data. The US will release the usual weekly unemployment figures, the June Chicago Fed National Activity Index and Existing Home Sales for the same month.

USD/JPY short-term technical outlook

From a technical point of view, the USD/JPY pair is neutral-to-bullish. The 4-hour chart shows that it keeps developing between moving averages, with the 20 SMA advancing modestly below the current level and the 100 SMA capping advances in the 110.40 region. Technical indicators hold on to positive levels, with limited upward strength. The pair needs to break above 110.45 to confirm a new leg higher, which could extend beyond 111.00.

Support levels: 109.80 109.40 109.05  

Resistance levels: 110.45 110.90 111.25

View Live Chart for the USD/JPY