The US dollar is holding a firm grip over the Japanese yen as the week gets going, and USD/JPY still carries a mild upward lean. Yet analysts at United Overseas Bank (UOB) argue that the room to run higher is tight. As laid out by strategist Quek Ser Leang, any fresh climb in the pair should struggle to punch past 162.75, and the sturdier barrier at 163.00 looks safe from any real challenge for now.
According to live market figures, USD/JPY is changing hands near 162.52, essentially flat against the previous close of 162.51. Over the past year the pair has swung between 146.22 and 162.84, which means the current price is sitting close to the top of that range.
The next 24 hours
Last Friday's read also flagged an upside bias for the dollar, but with a warning that any advance would stay boxed in between 162.10 and 162.65. The dollar then drifted between 162.12 and 162.51 before settling at 162.39, a move of just 0.01% that amounted to almost no change. In early Asian trade today the dollar traded firm, and the lean remains to the upside.
In Quek's words, "any advance is expected to face firm resistance at 162.75." On the way down, the first cushion sits at 162.35, and if that gives way the next support is 162.20. In other words, over the short term the path is narrow in both directions.
One to three weeks and beyond
Across the coming one to three weeks, the pair is likely to stay penned within a 161.30 to 163.00 band. On a longer one to three month view, the uptrend can keep going as long as the price stays above the 21-day EMA, which sits near 161.00. A slip beneath that level would be the real signal that the trend is turning.
What the charts are signalling
The longer-term technical picture broadly backs that story. Live data puts the EMA20 at 161.96, the EMA50 at 160.93 and the EMA200 at 156.79, with the EMA50 above the EMA200, a golden cross that points to underlying long-term strength. The RSI(14) reads 62, so momentum is positive without yet pushing into overbought danger.
Not every signal is pointing up, though. The MACD is at 0.49 against a signal line of 0.55, leaving the histogram slightly negative, a hint that momentum is cooling a touch. The ADX(14) is a mere 17, which says there is no powerful trend at play right now but rather a range-bound market. The Stochastic fast line is at 91 with its signal line at 85, both stretched high. The Bollinger bands run from 161.36 to 162.86, and price is sitting inside them. The ATR(14), a gauge of daily swings, is at 0.62, with nearby support around 160.62 and resistance around 162.84.
The overall message is clear. The dollar has the edge, but 162.75 and, above it, 163.00 are walls the market will need to show more force to break. Until then, the dollar may simply keep grinding up and down against the yen inside a tight band.
