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  • The USD/JPY exchange rate recovered nicely from its two-week low hit earlier this week.
  • JPY’s safe haven and extended support have been undermined by the rebound in risk sentiment.
  • Weak demand for the US dollar keeps bulls from aggressive betting and limits gains.

As of the start of the European session, the USD/JPY price is down a few pips from the daily high and trading just above the psychological 115.00 level.

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The USD/JPY staged a nice recovery from the 114.80-114.75 range or two-week low hit earlier this Friday due to weaker safe-haven demand. State Secretary Anthony Blinken agreed to meet with Russian Foreign Minister Sergey Lavrov later next week and expressed hope for a diplomatic solution to the crisis in Ukraine. However, investors subsequently turned away from traditional safe-haven assets due to a rebound in global risk sentiment.

Although the bulls did not bet aggressively because of fears of a Russian invasion of Ukraine. Indeed, US President Joe Biden and British Prime Minister Boris Johnson have accused Russia of fabricating a pretext for invading Ukraine. In addition, the Russian media reported on Thursday that rebels in eastern Ukraine accused government forces of shelling their territory. Therefore, the reduced demand for the US dollar should restrain the market’s optimism and the USD/JPY pair.

Uncertainty has increased the Fed’s tightening plans to combat stubborn inflation in light of recent geopolitical events. Moreover, Wednesday’s FOMC meeting minutes were less aggressive, putting pressure on the US dollar. For this reason, it would make sense to wait until further buying occurs before making aggressive bullish bets on USD/JPY. In addition, in the early North American session, market participants will be eagerly awaiting the US existing home sales data.

US dollar prices may be affected by these data, adding to the momentum of the USD/JPY pair. Furthermore, on the last day of the week, traders will consider a broader market risk stance to take advantage of short-term opportunities.

USD/JPY price technical analysis: Bulls emerging at 115.00

usd/jpy price

The USD/JPY price found respite around the 200-period SMA on the 4-hour chart. Moreover, the chart shows an up bar with a very high volume closing slightly off the highs. It indicates a potential bullish reversal. The pair have already done a 73% average daily range which shows a high volatility day.

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However, the 20-period and 50-period SMAs continue to weigh on the pair. The downside remains supported by the 115.00 area while the upside may find stiff resistance at 115.50 ahead of 116.00.

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