Today, on August 1st, 2014, the American currency has already strengthened by 0,1% against the Japanese Yen.
At this point, the currency pair is trading closer to the upper border of the price range set in February.
So, Market Leader experts assume that USDJPY is about to make a major breakout. It seems like traders are back and ready to increase the volatility of the currency pair after a long period of consolidating within the 100,73-103,00 price range since February 2014.
Meanwhile, the US Dollar reached the 4-week high against the Japanese Yen at 103,09. This happened on Wednesday amid strong economic figures that came from the USA. Most likely, the volatility and liquidity of USDJPY will increase after the US and Japanese economies showed divergence in terms of the pace of economic recovery.
After rallying by 21% in 2013, the US Dollar stopped gaining strength against its Japanese counterpart since major inflows of money came back to the Japanese Yen as a safe-haven asset amid geopolitical risks. The range trading was caused by slower-than-expected economic recovery in the USA coupled with aggressive weakening of the Japanese Yen.
If the US economic growth accelerates and holds steady in the near future, the US Dollar will ultimately resume the rally against the Yen. Apparently, the economic situation in Japan seems to be worsening, which undermines the trust in «Abenomics» or a radical program aimed at reviving the Japanese economic growth in years to come. As a result, there are all chances that the Bank of Japan is going to continue the quantitative easing program started. If this is the case, the Dollar will gain more strength against the Yen amid the expectations of higher interest rates while the Yen sees further weakening amid monetary easing.
In mid-term perspective, USDJPY is likely to be fairly popular among Forex traders amid the divergence between the BoJ and the Fed's policies. If the US economy continues to grow, USD may rally up to 105,00 against JPY by this fall.
Masterforex-V Academy on USDJPY Prospects
In order to see the overall picture first, Masterforex-V Academy started analyzing the situation in the market of USDJPY from a big-scale time frame, which is the Daily chart.
On January 2nd, the US Dollar hit a major high against the Japanese yen at 105,46. Since then, the US Dollar started losing value to hit a major low at 100,73. Later on, we could see a long-term period of consolidation within the scope of the 100,73-103,00 range, with two peaks outside of it at 103,76 and 104,09 (false breakouts).
Since Wednesday, July 30th, the price has been testing the top of the range. If to consider the dynamics for the last 5 months, we can conclude that the US Dollar set monthly highs against the Yen each time the US Non-Farm report came out strong. The highs were followed by corrections.
Based on the synthesis of binary patterns, which serve as the basis for the Masterforex-V Academy trading strategy, the experts conclude that there are 2 key long-term scenarios:
A break above 103,00 followed by a further rally of the US Dollar or a downswing to 102,00-101,00. The long-term scenario is more interesting to investors.
As for Forex traders, it is more interesting ot consider the mid-term prospects of USDJPY, as shown in the H4 chart.
After this week's dynamic rally, we can see that the 103,00 is a strong level of resistance. This level may be broken if backed by strong employment figures today. If this is the case, we are likely to see the price going up to 103,43 and 103,76. If the report is weak, we may well expect a drop down to 102,26 and 101,71.
