USD/JPY Eyes Resistance at 139 to Extend Winning Streak to Four

Highlights

• The USD/JPY extended the winning streak to three sessions on Tuesday.
• Investors had to wait until the US session for US retail sales and industrial production numbers to move the dial.
• However, it is a quiet day ahead, with no economic indicators from Japan to consider and US housing sector numbers unlikely to influence the Fed.

It is a quiet morning for the USD/JPY. There are no economic indicators from Japan or China to influence early in the session. The lack of economic indicators will leave the USD/JPY in the hands of market risk sentiment as investors grapple with the latest stats from China that paint a grim picture for the region.

On Tuesday, better-than-expected Tertiary Industry Activity Index numbers left the USD/JPY on the back foot ahead of the US session.

However, investors must wait until Friday for national inflation numbers to assess whether the BoJ will shift from its ultra-loose monetary policy stance.

The US Session

It is a relatively busy day on the US economic calendar, with the US housing sector in the spotlight. Prelim building permits and housing start numbers for June will draw interest. Economists forecast upbeat housing sector numbers, supporting a July Fed interest rate hike.

A continued uptrend in permits and starts would signal optimism among home builders and strong home buyer demand. Upbeat numbers would support the theory of a soft landing despite the disappointing US retail sales and industrial production numbers. The housing sector is a litmus test of the US economy.

USD/JPY Price Action

Daily Chart

The Daily Chart showed the USD/JPY testing resistance at the 139 psychological level and the 139.5 – 138.8 resistance band. Significantly, the USD/JPY sat below the 50-day EMA (139.956). However, the USD/JPY remained above the 200-day EMA (136.500), signaling bearish momentum over the near term but bullish momentum over the longer-term time horizon.

Notably, the 50-day EMA narrowed on the 200-day EMA and reflected bearish near-term momentum.

Looking at the 14-Daily RSI, the 37.58 reading signals a bearish outlook, aligning with the 50-day EMA (139.956) to target sub-138 and the 136.3 – 135.6 support band. However, a USD/JPY move through 139 would support a breakout from the 138.8 – 139.5 resistance band and bring the 50-day EMA (139.956) into play.

4-Hourly Chart

Looking at the 4-Hourly Chart, the USD/JPY faces strong resistance at 139. The USD/JPY remained below the 50-day (139.831) and 200-day (140.715) EMAs, sending bearish signals.

Significantly, the 50-day EMA pulled back from the 200-day EMA, signaling a return to sub-138 to bring the 136.3 – 135.6 support band into view.

The 14-4H RSI reading of 48.86 sends moderately bearish signals, with selling pressure outweighing buying pressure. Notably, the RSI bearish aligned with the 50-day EMA, signaling a fall to sub-138 to target the 136.3 – 135.6 support band. A move through 139 would bring the 50-day EMA and 140 into play.