USD/JPY Breakdown: Weakening Bullish Momentum Points to Further Declines

USD/JPY on a Daily timeframe 

USDJPY on a daily timeframe has exhibited significant price fluctuations, with a notable transition from a strong bullish trend to a bearish phase. Earlier in the trend, the pair found dynamic support at the 50-day (green) and 200-day (yellow) moving averages, reinforcing the bullish momentum. However, a shift in sentiment led to a breakdown below these key moving averages, turning them into resistance levels. Additionally, bearish divergences in the Stochastic oscillator near previous peaks signaled weakening bullish momentum before the reversal, confirming a downward trend. 

Recent price action has shown repeated failures to decisively reclaim the 150.000 psychological level, which now acts as a strong resistance in conjunction with the 200-day moving average. The price remains under pressure, with sellers defending this level and pushing USDJPY lower toward the 146.558 support zone. The 154.397 level remains a key resistance point, marking the last significant peak before the downtrend. If selling pressure persists, price may continue its descent, testing lower support levels such as 143.375 and 140.416. 

Technical indicators support the bearish outlook. The RSI stands at 35, approaching oversold conditions but still showing room for further downside. The stochastic oscillator has turned downward, reflecting the loss of bullish momentum. Notably, the bearish divergence seen in the Stochastic oscillator at previous peaks provided an early warning of the recent decline. Furthermore, the moving averages are now positioned bearishly, reinforcing the likelihood of continued downward movement unless the price regains critical resistance levels. 

The main scenario suggests further bearish continuation if USDJPY remains below the 150.000 resistance level. A decisive break below 146.558 would expose the pair to deeper losses toward 143.375 and potentially 140.416. With the moving averages acting as dynamic resistance and technical indicators favoring further declines, sellers currently hold the upper hand in market sentiment. 

An alternative scenario would require a breakout above 150.000, invalidating the bearish setup and potentially shifting momentum back in favor of buyers. A sustained recovery above this level, coupled with improving RSI and stochastic readings, could trigger a move toward the 154.397 resistance zone. Such a shift would likely be driven by a fundamental catalyst, such as a dovish stance from the Federal Reserve or an unexpected slowdown in Japan’s economic recovery. 

Fundamental factors continue to play a critical role in USDJPY movements. Interest rate divergence remains a key driver, with the Bank of Japan recently raising rates to 0.5%, the highest since 2008, while the Federal Reserve's policy direction remains under scrutiny. Economic performance disparities between the US and Japan contribute to volatility, as the US benefits from AI-driven productivity gains while Japan shows moderate recovery. Safe-haven flows influence the pair during geopolitical uncertainties. Looking forward, potential Fed rate cuts and further policy normalization by the Bank of Japan—expected to include additional rate hikes in 2025—could shift market sentiment. Political developments under the new US administration, global economic recovery trends, and continued technological advancements may further impact USDJPY dynamics in the coming months. 

Summary:

• Bearish Shift: USD/JPY has reversed from a bullish trend, breaking below key moving averages and turning them into resistance. 
• Resistance & Support: The 150.000 level is strong resistance, with support at 146.558, potentially leading to further declines. 
• Technical Indicators: RSI at 35 and a bearish stochastic signal more downside, with moving averages confirming a bearish outlook. 
• Fundamentals: U.S.-Japan interest rate divergence and economic factors could influence the pair, with a breakout above 150.000 shifting sentiment.