Japanese Yen Forecast: USD/JPY Plunges to Critical Support

Japanese Yen Technical Forecast: USD/JPY Weekly Trade Levels

• Japanese Yen rallies back into yearly open- USD/JPY breaks multi-year upslope
• USD/JPY now testing key technical support at yearly lows- FOMC rate decision on tap
• Resistance 141.98, 143.92-144.63 (key), 146.42/65– Support 140.25-141.02 (key), 137.24/91, 136.49

The Japanese Yen has rallied a staggering 13% against the US Dollar over the past three-months with USD/JPY plunging to a fresh yearly low on Friday. The decline takes price into a major technical support zone and the focus is on possible inflection off this mark heading into next week’s highly anticipated Fed rate decision. Battle lines are drawn on the USD/JPY weekly & daily technical charts.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Yen setup and more. Join live on Monday’s at 8:30am EST.

Japanese Yen Price Chart – USD/JPY Weekly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/JPY on TradingView

Technical Outlook: In last month’s Japanese Yen Technical Forecast we highlighted the threat for a near-term recovery as USD/JPY approached a key support pivot. We noted that, “From at standpoint, a good region to reduce portions of short-exposure / lower protective stops- rallies should be limited to 146.42 IF price is heading lower on this stretch with a close below 144.17 needed to fuel the next move.”

USD/JPY briefly registered an intraday high at 147.21 into the start of the month before reversing sharply lower with a break below support on September 4^th fueling a decline of more than 4.7% off the monthly high. The decline is now testing a critical support zone at 140.25-141.02- a region defined by the December swing low, the 61.8% Fibonacci retracement of the 2023 advance and the objective 2024 yearly open. Looking for possible exhaustion / price inflection off this mark in the days with the immediate decline vulnerable while above.

Japanese Yen Price Chart – USD/JPY Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/JPY on TradingView

A closer look at the daily chart shows USD/JPY continuing to trade within the descending pitchfork formation we’ve been tracking for months now. Note that the lower parallel converges on this support zone over the next few days and further highlights the technical significance of this threshold.

Initial resistance is eyed at the January low-day close (LDC) at 141.98 backed by the August close low / January low-week close (LWC) at 143.92-144/63. Key resistance remains unchanged at 146.42/65- a region defined by the February LDC, the March low, and the August LWC. Note that the median-line converges on this threshold into the October open and a breach / close above would be needed to suggest that more significant low is in place.

A break / weekly close below this key pivot zone would threaten another bout of accelerated losses for the greenback with subsequent support objectives eyed at 2023 March HDC / July low / March high at 137.24/91- look for a larger reaction there IF reached.  

Bottom line: USD/JPY has plunged into a major technical support confluence and the focus is on a reaction off this pivotal zone. From a trading standpoint, a good region to reduce short-exposure / lower protective stops – rallies would need to be limited to 144.63 IF price is heading lower on this stretch with a close below 140.25 needed to fuel the next major leg.

Keep in mind the FOMC interest rate decision is on tap Wednesday with market participants now split between a 25 / 50 basis point cut. We also get the updated interest rate dot plot and summary of economic projections – potential for some volatility here. Stay nimble into the release and watch the weekly close for guidance. We’ll review these charts in-depth in the on Monday in the Weekly Technical Outlook Webinar at 8:30am EST.

USD/JPY Key Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

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--- Written by Michael Boutros, Sr Technical Strategist with FOREX.com

Follow Michael on X @MBForex