FX.co ★ GokBoruHunter | USD/JPY

USD/JPY H4 Outlook Update Some selling pressure is emerging in the USD/JPY currency pair after a mild rise in the Asian session to 157.10 and a retracement from the two-week high, reached on Friday in reaction to the BoJ's dovish interest rate hike. Currently, spot prices are trading around 156.75, while prevailing sentiment appears slightly biased toward bullish traders. In line with expectations, the Bank of Japan increased the short-term interest rate to a 31-year high level on Friday. It stressed that it will keep raising interest rates in light of changes in activity, prices and financial conditions. Nevertheless, the 7-2 vote division suggested doubts within the board, along with a report of a slowdown in Japan's August inflation rate, which has reduced the chances of a hawkish tightening cycle ahead. Meanwhile, escalating tensions in the Middle East and the rising risk of conflict gave the safe-haven US Dollar (USD) a breather from its retracement drop from the level it reached in mid-July on Friday. The latest development in this respect is that Houthi rebels in Yemen, who Iran supports, claimed to have launched attacks on sensitive facilities in Saudi Arabia's capital city, Riyadh, using missiles and drones. Also, Iran outlined seven conditions for resuming negotiations with the US. Furthermore, the hawkish stance of the US Federal Reserve (Fed), suggesting a possible additional interest-rate increase this year, supports the US dollar and the USD/JPY currency pair. However, market participants are avoiding aggressive bullish positions and are waiting for more information on the situation in the Middle East. Another key event this week is the meeting between US President Donald Trump and Chinese President Xi Jinping, scheduled for Thursday. USD/JPY remains stuck below an important resistance zone, trading within the 200-period Simple Moving Average (SMA), currently around 157.61, on the 4-hour timeframe. Moreover, the spot price action is trading below the 61.8% Fibonacci retracement level of 157.49. Such developments form an important overhead resistance area that includes not only the 61.8% retracement level but also the 200-period SMA. A definitive breakout from this zone would pave the way for an upside opportunity to the 78.6% Fibonacci retracement level of 158.75 and the latest swing high of 160.36. On the downside, the first support is at the 50.0% Fibonacci retracement level of 156.60, with further support at the 38.2% Fibonacci retracement level of 155.72 and the 23.6% Fibonacci retracement level of 154.62. If the pair continues to decline, the next possible support is at the Fibonacci anchor of 152.85.