USDJPY eyes 38-year high as bullish trend resumes

THE USDJPY pair has been on a strong uptrend since early 2021, when it traded at 102.6, driven by sustained yen weakness and dollar strength. This prolonged bullish momentum saw the pair rise to a multi-decade high of 161.945 on Jul 3, 2024, its highest level since December 1986. At its peak, the USDJPY had climbed nearly 15 per cent from its opening price of 140.83 in January 2024.

However, the rally experienced a significant correction in the third quarter. By Sep 16, the USDJPY had dipped to 140.278, briefly erasing all its 2024 gains. This marked a key inflection point as the pair rebounded sharply in subsequent weeks, supported by renewed demand and favourable technical conditions. At the time of writing on Nov 22, the pair had recovered and was trading above 154.00, marking a year-to-date gain of approximately 10 per cent. This resilience highlights the strength of its long-term uptrend.

From a technical perspective, several factors suggest further upside for the USDJPY. Firstly, the pair has found consistent support above the 20-day exponential moving average (20-EMA) since early October 2024, reflecting strong underlying bullish momentum. Moreover, the recent Golden Cross, where the 50-day exponential moving average (50-EMA) crossed above the 200-day exponential moving average (200-EMA), is a classic bullish signal that typically marks the onset of a broader uptrend.

Secondly, the USDJPY’s steep recovery from mid-September has pushed the pair back above a critical dynamic support level that had previously provided a strong base in January, February, March, and December 2023. After reclaiming this support in late October, the pair successfully retested and confirmed the level around 151.7, a key horizontal support and resistance area that has been tested multiple times since October 2022. This successful retest reinforces the strength of the uptrend and provides a solid foundation for further gains.

Looking ahead, the USDJPY is positioned to retest the 38-year high at 161.945. A sustained breakout above this level would be a strong bullish confirmation, potentially opening the path towards the 165.00 zone, which aligns with a dynamic resistance trendline connecting three major highs since Q4 2022. As long as the USDJPY remains above the critical support at 151.7, the bullish outlook for 2024 remains intact, with further gains likely in the coming months.

The writer is senior strategist at Phillip Nova