USD/JPY Hovers Around Cycle High on Low Volume Session

The USD/JPY pair traded around its cycle high of 130.00 on Wednesday, as investors digested US-Sino headlines amid mounting Chinese growth fears. The pair was weighed down by the US Dollar recovery and risk aversion, as investors remained cautious ahead of the release of US inflation data later in the week.

The US Dollar Index (DXY) rose to its highest level in nearly two years, as investors bet that the Federal Reserve will continue to raise interest rates in an effort to combat inflation. The DXY is now up more than 10% year-to-date, and is on track for its best year since 2014.

The Chinese economy is facing a number of headwinds, including a property slowdown, a slowdown in exports, and a regulatory crackdown on the technology sector. The Chinese government has pledged to take steps to support the economy, but it remains to be seen whether these measures will be enough to avert a hard landing.

The Japanese Yen (JPY) is one of the most sensitive currencies to risk sentiment, and it has weakened sharply in recent months as investors have become more risk-averse. The JPY is now down more than 10% against the US Dollar year-to-date, and is on track for its worst year since 2016.

The US Dollar is likely to remain strong in the near term, as investors continue to bet that the Federal Reserve will continue to raise interest rates. The JPY is likely to remain weak, as investors remain risk-averse.

Technical Analysis

The USD/JPY pair is currently trading around its cycle high of 130.00. The pair is facing resistance at the 130.00 level, and a break above this level could open the door for a move towards the 131.00 level. The pair is also facing support at the 129.00 level, and a break below this level could lead to a move towards the 128.00 level.

The RSI indicator is currently in overbought territory, which suggests that the pair may be due for a correction. 

The MACD indicator is also in positive territory, which suggests that the trend is still bullish.

Trading Strategy

Traders who are looking to trade long USD/JPY could consider buying a breakout above the 130.00 level. Traders who are looking to trade short USD/JPY could consider selling a break below the 129.00 level.

Risk Disclaimer

The information contained in this article is for informational purposes only and should not be construed as investment advice. The reader is responsible for any investment decisions made.