Daily Price Outlook
The USD/JPY has experienced a decline from 145.06 to a low of 138.75 so far today, with the next target being the 137.90 level, which has transitioned from resistance to support. The pair remains below 139.00, holding onto mild losses, and is influenced by sluggish yields ahead of the release of US Retail Sales data.
During the early hours of Tuesday in Europe, USD/JPY continued its downward trajectory, reaching an intraday low of 138.50. Consequently, in a relatively calm market environment, the pair retraces the corrective recovery seen after hitting a two-month low last Friday.
Despite mixed emotions surrounding the anticipated US Retail Sales and Industrial Production data for June, the return of Japanese traders from vacation did not dampen market volatility.
The recent weakness in the risk-sensitive USD/JPY pair reflects the market's cautious optimism as concerns over the US-China conflict have eased in response to recent efforts by Washington to improve relations with Beijing through regular visits.
The upcoming Fed rate hike in July and divergent concerns about the future actions of central banks worldwide continue to influence traders' sentiment towards the USD/JPY pair.
The USD/JPY pair is currently trading within a rising wedge pattern, as indicated on the chart. In order to establish a bearish momentum and resume the corrective downtrend, the price needs to break below the support line of this pattern at 138.50.
This would potentially push the price lower towards the initial targets at 137.35 and further extend to 135.55 upon surpassing the previous level.
Considering the negative readings from key technical indicators, we maintain our bearish outlook for the near future.
However, if the price manages to breach above 139.17, it would halt the current downward pressure and potentially lead to an attempt to regain the primary bullish trend.
For today's trading, the anticipated range is between support at 137.60 and resistance at 139.17.
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