Graphics: USD/JPY is a few pips away from a multi-month resistance zone. What’s next?

Welcome to the first NFP Friday of the year!

If you are hunting for a more USD-related setup, you may want to keep USD/JPY on your radar as it has been rising this week and is now approaching a major resistance area.

Will USD/JPY run into trouble here, or are we looking at a breakout to the upside that is starting to take shape?

The U.S. dollar fell points against most major currencies as traders shrugged off lackluster U.S. economic reports and instead relied on the relative strength of Uncle Sam.

Meanwhile, the Japanese yen is struggling to benefit from higher Japanese bond yields and bearish BOJ expectations, with traders still largely favoring the greenback as a safe haven at the start of the year.

The direction of USD/JPY could either reverse or gain momentum when the US releases the latest labor market data.

Remember that movements in the direction and conditions of market price volatility are usually driven by fundamental factors. If you haven’t done your homework yet US dollar and Japanese yenthen it’s time to check the economic calendar and stay up to date with the daily fundamental news!

USD/JPY has recovered from losses earlier in the week and is now trading roughly 100 pips above the weekly low of 156.20.

Before you buy USD/JPY like there’s no tomorrow (there is, but tomorrow is the weekend 😉), you should know that the pair is approaching the 157.78 R2 reversal point line, which coincides with the resistance range that has been in place since mid-November.

A series of red candlesticks and a clear rejection of this resistance area could create bearish pressure and push USD/JPY back to the psychological level of 157.00, if not the 156.20 mid-point.

But if USD/JPY maintains its January momentum and manages to trade steadily above 158.00, we can expect a sustained rally and a possible approach to the big psychological mark of 160.00.

Whichever bias you trade, remember to practice proper risk management and watch for top-level catalysts that can affect overall market sentiment.

Disclaimer:
Please note that the technical analysis content provided here is for informational and educational purposes only. It should not be construed as trading advice or offering any particular direction. Technical analysis is only one aspect of a comprehensive trading strategy. The technical setups discussed are meant to highlight potential areas of interest for other traders to observe. Ultimately, all trading decisions, risk management strategies and their resulting results are the sole responsibility of each individual trader. Trade responsibly.