FX.co ★ Analysis and forecast for USD/JPY on January 25, 2021

For the USD/JPY currency pair, I would like to recall two very characteristic and quite obvious factors. The first is that both currencies, depending on a particular situation, are safe-haven currencies. The second is already a historical and quite important moment - the reaction of the pair to important macroeconomic reports from the United States. Also, the dollar/yen is very sensitive and strongly reacts to the decisions on rates and the minutes of the Federal Reserve System and the US data on the labor market. This reaction to the events listed above can be attributed to the fact that both currencies are safe assets. Sometimes market participants show nervousness and worry, not understanding which currency to go to. In general, the USD/JPY pair is certainly very interesting and it is not easy to trade it. If you remember, in the last few weeks, the Japanese currency moved in its direction.

Weekly

After the appearance of a bullish circled candle, the option was suggested, if not a change in the trend, then the bulls would conduct a full-fledged course correction for this instrument. What happened is visible on the weekly chart of USD/JPY. The last two doji candlesticks with tiny bearish bodies and long shadows indicate that the USD/JPY bulls no longer have the strength to move the quote in the north direction. However, I recommend you to pay attention that the trades on January 18-22 ended above the red Tenkan line, and the lower shadow of the last candle is much longer than the upper one. Given these factors, one should not exclude lifting the pair to a nearby and fairly good resistance of 104.40, and slightly higher 104.82 through the blue Kijun of Ichimoku indicator, which can provide pretty strong resistance to attempts of growth.

Daily

On the daily chart, we see a rather unusual picture, the essence of which is that the dollar/yen is traded between the Kijun line (support), and the resistance is represented by the red Tenkan line and the 50 simple moving average. It should also be noted that after the dismal and very uncertain doji candle for January 21, there were very big doubts that the players on the short will be able to continue their mission. And indeed, the pair not only did not try to update the previous lows but showed a rather significant increase, which was stopped by the Tenkan with 50 MA.

Turning to trade recommendations, I would like to note that the situation from the point of view of technical analysis is quite ambiguous for entering the market. I suggest looking for purchases after the pair drops to the area of 103.70-103.50. It is best to open sales at higher and more favorable prices, for example, after the pair rises to the area of 103.85-104.15.

From the macroeconomic reports, we can only mention the data on the economic activity index from the Federal Reserve Bank of Chicago, which will be published at 14:30 London time.