The USD/JPY currency pair has extended its upward trajectory, breaking past 159.02 last week before encountering resistance near the 160.38 level. This week, the initial bias is neutral, with traders awaiting further signals. A firm break above 160.38 could target the 100% projection of the move from 152.87 to 159.02, placing the next potential resistance at 162.21. Conversely, a drop below 157.65 might indicate a short-term top, with support potentially found at 156.06.
In broader terms, the current market behavior suggests that the first leg of the corrective pattern from the high of 163.97 has concluded with a three-wave decline to 152.87. Analysts anticipate a further rally to retest this high, though they caution that strong resistance could cap the upside.
Last week, USD/JPY surged above 160, driven by a hawkish repricing of Federal Reserve interest rate expectations. Japanese officials issued warnings about potential intervention, a familiar response to sharp currency movements. The upcoming week features several Fed speakers, including Chair Kevin Warsh, but a lack of top-tier US economic data may limit market volatility.
Meanwhile, gold prices are at risk of a significant breakdown, with analyst Jesse Colombo warning that the yellow metal could lose an additional $400 to $500 if the US dollar's rally continues. Colombo, founder of the BubbleBubble Report, highlighted the potential for further declines in gold amid a strengthening dollar.