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The USD/JPY currency pair surged towards its December high, driven by a confluence of factors. Expectations of a prolonged period of higher interest rates in the United States, fueled by the potential for a Trump presidency, underpinned the US Dollar. The Federal Reserve, in its December statement, signaled a more cautious approach to interest rate cuts, further bolstering the Greenback.
Weakening economic data from China added to the risk-off sentiment, further benefiting the safe-haven US Dollar. The Caixin Manufacturing PMI for December came in below expectations, indicating a slowdown in the Chinese economy.
Technical Analysis Points to Further Upside
From a technical perspective, the USD/JPY exhibited a bullish bias, forming higher highs and higher lows on a daily timeframe. A decisive break above the December high of 157.92 would open the door for further gains towards the weekly high of 158.85 and potentially even the 2024 peak of 161.95.
Support levels lie at the recent intraday low, followed by the key 200-day Simple Moving Average (SMA) at 152.29. A breach below the December low of 148.63 could signal a shift in momentum, potentially leading to a decline towards the 2024 low of 139.57.
The 4-hour chart showed a rising Relative Strength Index (RSI), suggesting further upside potential in the near term.
The USD/JPY currency pair is poised for further gains, supported by a hawkish Federal Reserve stance, a weakening global economic outlook, and a bullish technical picture. While the potential for a Trump presidency adds to the uncertainty, the overall trend appears to favor USD strength against the Japanese Yen.
