- USD/JPY extended its sideways consolidative price action through the mid-European session.
- The set-up favours bullish traders and supports prospects for a move beyond the 110.00 mark.
- Weakness below the 109.35 support area has the potential to drag the pair to sub-109.00 levels.
The USD/JPY pair struggled to capitalize on the previous day’s US CPI-inspired strong gains and witnessed a subdued/range-bound price action on Thursday. The was last seen hovering around the 109.50-60 region, just below the one-month tops set earlier today.
A generally softer risk tone extended some support to the safe-haven Japanese yen. On the other hand, a modest pullback in the US Treasury bond yields held the US dollar bulls from placing aggressive bets and further collaborate to cap the upside for the USD/JPY pair.
From a technical perspective, the two-way price moves constitute the formation of a rectangle on hourly charts. This suggests indecision over the USD/JPY pair’s intraday direction and warrants some caution before positioning for any further appreciating move.
Meanwhile, technical indicators on daily/hourly charts are holding in the bullish territory and support prospects for an eventual breakout on the upside. That said, investors preferred to wait on the sidelines ahead of the Initial Jobless Claims from the US.
From current levels, some follow-through buying has the potential to push the USD/JPY pair back towards the key 110.00 psychological mark. The momentum could further get extended towards the top end of an ascending channel, currently around the 110.25 region.
On the flip side, immediate support is pegged near the 109.35 horizontal resistance breakpoint. Sustained weakness below might turn the USD/JPY pair vulnerable to slide further to the 109.00 mark before bears target the ascending channel support, around the 108.80 region.
USD/JPY 1-hour chart
Technical levels to watch