USD/JPY Breaks Out but AUD/JPY Lacks Bullish Spark

Technical analysis of the USD/JPY pair

USD/JPY extended its advance on Thursday, rising nearly 0.8% to 142.93, boosted by a rally in US Treasury yields after key Fed officials, including the FOMC chairman, expressed concern. Their support for an interest rate hike later this year as part of the ongoing fight for recovery. Stabilizing prices and bringing inflation back to the 2.0% target.

Bulls have dominated the market in 2023, with the pair up more than 2.5% in June and nearly 9% since the start of the year. At the moment, there is no indication that it will stop anytime soon, although caution should be exercised, as Japanese authorities may soon step in to curtail speculative activity in the forex space.

Looking at the price action, USD/JPY broke the Fibonacci resistance at 142.50 after today’s rally, reaching its best level since November 2022. If this breakout continues on a weekly basis, the buying momentum could gain momentum in the coming days, paving the way for a move towards The psychological barrier is 145.00.

Should the bullish scenario persist, traders need to exercise more self-control to avoid making mistakes in the event of major interventions in the currency market. Last year, Japan’s Ministry of Finance started selling US dollars to support the yen when the exchange rate was trading at 146.00 and 152.00 yen.

Focusing on the downside, if USD/JPY fails to stay above 142.50 and starts falling, a pullback towards technical support at 140.80/140.50 is likely. And while prices may establish a base around those levels before bouncing back, a breakdown may jeopardize the constructive view, which encourages sellers to challenge the 139.00 handle.

Technical chart of the USD/JPY pair

USD/JPY technical chart made with TradingView

AUD/JPY analysis

After rising almost vertically since late May and entering overbought territory, AUD/JPY set multi-month highs around 97.70 a few days ago. However, the bullish momentum weakened amid a cautious atmosphere in the financial markets.

While the RBA-BoJ monetary policy divergence can be seen as a positive driver for the Australian dollar, shifts in global sentiment may be a more important catalyst to watch. In this context, traders should closely monitor Chinese economic activity. However, if the incoming data shows that the growth profile of the Chinese economy is getting worse, risk aversion may start, which will strengthen the Japanese yen and lead to a deep correction in the AUD/JPY.

From a technical point of view, AUD/JPY was sold off earlier this week, but ran into support near 95.80/95.55. From those levels, the pair rose in a moderate rebound, but the momentum seemed to stall on Thursday, indicating fading buying interest.

We will have more clues on the outlook in the coming days, but if AUD/JPY extends its rebound, the initial resistance is at 96.85. Overcoming this ceiling could pave the way for a retest of the 2023 peaks. Conversely, if sellers regain control of the market and push prices down, the support is at 95.80/95.55, but a breakdown could lead to more losses, with the next target on the downside at 94.97. , followed by 93.27.

Technical analysis of the Australian dollar / Japanese yen

AUD/JPY Technical Chart Created with TradingView