USDJPY on the Rise Amid Trump Policies and Dollar Strength

Andreas Thalassinos
Andreas Thalassinos

14.11.2024

USDJPY has been on a strong upward path since mid-September, supported by Trump's re-election, a strengthening US dollar, and positive technical indicators. Fundamentals add momentum, with expectations of inflationary policies under Trump boosting the dollar's appeal. However, a near-term correction may still be possible as overbought conditions emerge.

Overview

USDJPY has been on a strong upward path since mid-September, supported by Trump's re-election, a strengthening US dollar, and positive technical indicators. Fundamentals add momentum, with expectations of inflationary policies under Trump boosting the dollar's appeal. However, a near-term correction may still be possible as overbought conditions emerge.

Key Economic Events

Thursday 02:30 am (GMT+2) - Australia: Employment Change (AUD)

Thursday 15:30 (GMT+2) - USA: PPI m/m (USD)

Friday 09:00 am (GMT+2) - UK: Retail Sales m/m (GBP)

Friday 15:30 (GMT+2) - USA: Retail Sales m/m (USD)

Technical Analysis

Since its drop to the 139.571 level on September 16, USDJPY has rebounded, establishing an upward trajectory driven by the re-election of Trump, a strengthening US dollar, and supportive technical indicators. Notably, the emergence of a bullish reversal pattern, known as a "failure swing," marked a shift in sentiment. The trough at 141.641 held above the previous low, and prices subsequently broke past the 146.491 peak, signaling a reversal.

A "Golden Cross" formation, with the 20-period Exponential Moving Average (EMA) crossing above the 50-period EMA, further strengthened the bullish momentum. USDJPY remains above the 50-period EMA, while positive signals from the Momentum oscillator and the Relative Strength Index (RSI) suggest the potential for continued appreciation. The Momentum oscillator is positioned above the 100 baseline, with the RSI exceeding 50—both indicators aligning with further upside potential. However, a negative divergence between the Momentum oscillator and price levels suggests caution, as a near-term correction may be on the horizon.

Potential Upside Targets  

Should the bulls maintain market control, traders may direct their attention toward the four potential resistance levels below:

156.129: The initial resistance is 156.129, representing today's highest price.

157.891: The second price target is identified at 157.891, corresponding to the weekly resistance, R3, calculated using the standard Pivot Points methodology.

158.828: The third target is established at 158.828, aligning with the 261.8% Fibonacci Extension drawn from the swing high, 154.706 to the swing low, 152.136.

162.963: An additional price target is estimated at 162.963, which corresponds to the 423.6% Fibonacci Extension drawn from the swing high, 154.706 to the swing low, 152.136.

Potential Downside Targets  

Should the sellers take market control, traders may consider the four potential support levels listed below:

154.706: The first level of support is identified at 154.706, representing a peak from November 7.

152.861: The second support level is 152.861, reflecting the weekly Pivot Point estimated using the standard methodology.

151.268: The third support level is identified at 151.268, corresponding to a swing low formed on November 6.

149.423: An additional downward target is observed at 149.423, corresponding to the weekly support, S2, calculated using the standard Pivot Points methodology.

Fundamentals

The US dollar continues to strengthen, buoyed by expectations of higher inflation under President-elect Trump's pro-growth policies and potential tariffs. Swissquote Bank notes the dollar is in "overbought" territory, suggesting a possible minor correction, but remains optimistic about its outlook amid doubts over the Fed's ability to cut rates further. The DXY dollar index is up 0.1% to 106.601. Meanwhile, concerns over US trade protectionism have bolstered the dollar as a safe-haven currency, impacting both G-10 and Asian currencies, with the yen and Singapore dollar weakening amid tariff fears and potential Japanese intervention.

Conclusion

In conclusion, USDJPY remains in a strong uptrend, supported by both technical indicators and expectations of inflationary policies under Trump's administration, which continue to drive the US dollar's strength. While bullish momentum persists, overbought conditions suggest a potential for a near-term correction. Traders should watch key resistance and support levels closely, as upcoming economic events may further influence price direction.

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Andreas Thalassinos
Andreas Thalassinos

Andreas Thalassinos is a recognized authority in the financial markets and world renowned for his expertise in algorithmic trading. He is a Certified Technical Analyst and highly respected lecturer in the education of traders, investors, and financial markets professionals. Thalassinos has played a key role in the development of education within the industry, training tens of thousands of traders of all skill levels. Traders value his seminars and workshops for the rich content, his passionate, charismatic, and lively presentations.