US Dollar Forecast: USD/JPY Rally Triggers Overbought RSI Signal

US Dollar Outlook: USD/JPY

USD/JPY extends the advance from the start of the week to push the Relative Strength Index (RSI) into overbought territory, and the move above 70 in the oscillator is likely to be accompanied by a further advance in the exchange rate like the price action from earlier this year.

US Dollar Forecast: USD/JPY Rally Triggers Overbought RSI Signal

USD/JPY appears to be tracking the rise in US Treasury yields as it climbs to a fresh monthly high (153.19), and the exchange rate may continue to appreciate ahead of the snap election in Japan as the International Monetary Fund (IMF) raises its growth forecast for the US.

Join David Song for the Weekly Fundamental Market Outlook webinar. David provides a market overview and takes questions in real-time. Register Here

It remains to be seen if the Federal Reserve will respond to the fresh updates coming out of the IMF as the central bank moves towards a neutral policy, but there appears to be a growing dissent within the Federal Open Market Committee (FOMC) as the economy shows little signs of an imminent recession.

With that said, waning speculation for another 50bp Fed rate cut may keep USD/JPY afloat, but swings in the carry trade may continue to influence the exchange rate as Chairman Jerome Powell and Co. pursue a neutral policy.

USD/JPY Price Chart – Daily

Chart Prepared by David Song, Strategist; USD/JPY on TradingView

USD/JPY cleared the August high (148.51) as it carves a series of higher highs and lows, with a break/close above 153.80 (23.6% Fibonacci retracement) opening up 156.50 (78.6% Fibonacci extension).
Next area of interest comes in around the 1990 high (160.40) but lack of momentum to extend the bullish price series may pull the Relative Strength Index (RSI) back from overbought territory.
Failure to hold above the 2022 high (151.95) may push USD/JPY back towards 148.70 (38.2% Fibonacci retracement) to 150.30 (61.8% Fibonacci extension) region, with a break/close below the 144.60 (50% Fibonacci retracement) to 145.90 (50% Fibonacci extension) zone opening up the monthly low (142.97).

Additional Market Outlooks

US Dollar Forecast: AUD/USD Falls Toward September Low

Gold Price Breakout Pushes RSI into Overbought Zone

USD/CAD Rally Eyes August High as RSI Pushes into Overbought Zone

British Pound Forecast: GBP/USD Susceptible to Test of September Low

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.