The US Dollar (USD) may drop below 144.90 against the Japanese Yen (JPY), but it’s unlikely to breach the major support level of 144.50. Analysts believe the USD is in a consolidation phase, typically staying within a range of 144.50 to 147.30. In the past 24 hours, it was expected that the USD would test 144.95, but a significant drop below that wasn’t predicted. After hitting a low of 144.90, it bounced back to 145.62. While momentum suggests a possible drop below 144.90, it’s not expected to threaten the 144.50 support. Resistance levels are noted at 145.80 and 146.30.

USD Consolidation Phase

Over the next one to three weeks, the USD is likely to stay in a consolidation phase. The expected range has been adjusted to 144.50 to 147.30, down from an earlier range of 144.50 to 148.50. A clear close below 144.50 could lead to a further decline. Recent economic data shows mixed trends, with Moody’s downgrade of US sovereign credit affecting both currency and gold markets. The downgrade weakened the USD while boosting EUR/USD and GBP/USD. Gold and stock futures reacted cautiously, considering uncertainty in the US and China. Recently, the Dollar-Yen pairing showed a slight retracement that didn’t indicate a major change in direction. After briefly dropping below 144.95, the Dollar quickly recovered from 144.90. This bounce confirms that the Dollar is moving within a tight range. Right now, its price behavior suggests consolidation rather than a significant shift. The important level to watch remains 144.50. This level hasn’t been thoroughly tested, and unless we see a strong close below it with momentum, it will likely act as support. Approaching this level may cause temporary spikes in daily volatility, but without sustained pressure, the overall trend is unlikely to change.

Revised Range Outlook

The updated range, set between 144.50 and 147.30, indicates a narrower outlook than previously predicted. Lowering the upper boundary suggests less confidence in a significant upside or increased caution around resistance near 147.00. This clearer framework helps in monitoring price movements in the coming days. The downgrade from Moody’s has affected multiple asset classes. The Dollar has lost some strength, impacting various currency pairs. Both the Euro and Pound have gained against it, and gold has seen increased demand as a safe haven. Meanwhile, stock futures have shown some uncertainty, reflecting how sensitive markets are to financial stability concerns, especially related to credit risk. From a positioning perspective, if the USD attempts to drop below 144.90, it’s important to consider the broader context. If this happens alongside decreased confidence in US financial instruments, such as more downgrades or disappointing economic data, the Dollar may not show the same resilience as earlier this month. However, if the USD holds above 145.00 and the Yen weakens, it could rise to around 146.00 or even higher, but not convincingly break out of the consolidation phase. Resistance levels are now more firmly set around 145.80 and 146.30. These levels will likely limit upward movements unless market sentiment shifts or unexpected economic news changes expectations for interest rates. Traders dealing with options or futures expiries should pay close attention to these levels, as they often act as magnets if implied volatility stays consistent. As we approach upcoming economic updates, especially those related to inflation and employment, shifts between risk-on and risk-off sentiments may affect Yen crosses more broadly. This may push the USD/JPY toward the extremes of its current range, but there’s no strong indication yet of a significant breakout above 147.30 or below 144.50 unless external factors become more pressing. Create your live VT Markets account and start trading now.

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