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USD/JPY Holds Bullish Bias Despite Short-Term Pullback
Traders' Opinions
Summary:
The Japanese Yen strengthened modestly after the US and Iran paused military operations, easing demand for the safe-haven US Dollar. Markets are now focused on this week's Federal Reserve and Bank of Japan policy meetings.
Buy
CLOSEDUSDJPY
End Time
163.599
Entry Price
165.000
TP
162.000
SL
163.842 -0.011 -0.01%
112
Points
Profit
162.000
SL
163.711
CLOSING
163.599
Entry Price
165.000
TP
The Japanese Yen edged higher against the US Dollar on Monday as improving risk sentiment prompted investors to trim long Dollar positions. USD/JPY retreated from fresh 40-year highs near 164.00 and slipped back toward the 163.50 area after Washington and Tehran confirmed a temporary halt in military operations, raising hopes for renewed diplomatic talks.
Despite the pullback, the broader trend remains bullish. The Yen's rebound appears to be driven mainly by short-covering rather than improving domestic fundamentals, with traders reluctant to take large positions ahead of the Federal Reserve's decision on Wednesday and the Bank of Japan's meeting on Friday.
Lower oil prices have also eased pressure on Japan's import-dependent economy. However, unless the BoJ delivers a more hawkish outlook or the Fed surprises with a dovish stance, the interest rate gap is likely to continue supporting the US Dollar. In my view, the latest decline looks like a temporary correction rather than a reversal of the broader uptrend.
Technical Analysis
USD/JPY continues to respect its broader uptrend, although price action has entered a brief consolidation phase after failing to sustain momentum above the 164.00 barrier. The recent breakout from the multi-week consolidation remains valid, with buyers successfully defending the former resistance zone around 163.20-163.30, which now acts as the first layer of support.
The pullback appears healthy rather than bearish. Price is holding above the rising trendline that has guided the rally since early July, while the 50%-61.8% Fibonacci retracement zone (163.17-163.32) is providing additional confluence. As long as this support cluster remains intact, buyers are likely to retain the upper hand.
A successful rebound from current levels would shift attention back toward 164.00, the most immediate resistance. Clearing that hurdle would expose 164.30, followed by the 164.70 Fibonacci extension. A sustained move through these levels would reinforce bullish momentum and bring the 165.00 psychological handle into view.
On the downside, losing 163.15 would be the first sign that bullish momentum is fading. Such a move could trigger a decline toward 162.65, where previous breakout support and the ascending trendline converge. A decisive break beneath that region would invalidate the current bullish structure and increase the likelihood of a deeper retracement toward 162.00.
Momentum is beginning to cool after the recent rally. The RSI has turned lower from elevated levels but continues to hold above its midpoint, reflecting easing buying pressure rather than a shift in trend. Likewise, the MACD remains in positive territory, although narrowing histogram bars suggest bullish momentum is slowing as traders await fresh catalysts from this week's Federal Reserve and Bank of Japan meetings.
TRADE RECOMMENDATION
BUY USD/JPY
ENTRY PRICE: 163.60
STOP LOSS: 162.00
TAKE PROFIT: 165.00
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