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Market Condition: Buy / Bullish, but stretched
The USD/JPY 20-pip Renko chart, as you can see bellow, remains constructive. Price is trading close to 161.879, and the brick structure continues to show a clean sequence of higher highs and higher lows. That keeps the short-term trend pointed upward.
From a price-structure perspective, the pair is now pressing a very important resistance area around 161.88–162.00. A confirmed break above that zone would keep the bullish continuation in play and open the way toward 162.20 and then 162.80. On the downside, the first support sits near 161.40, followed by 161.00. A deeper pullback below 161.00 would weaken the immediate bullish setup and suggest the Renko advance is losing momentum.
The supporting indicators are still favorable. On-Balance Volume is rising and holding near recent highs, which suggests buying participation remains firm. ATR is around 0.291, showing volatility is still active enough to support directional movement. In practical terms, this is still a bullish chart, but one that is now trading close to an area where upside extension may become more fragile.
Fundamental Note
The macro backdrop is mixed, but it still explains why USD/JPY remains elevated. Reuters reported that the Bank of Japan raised its short-term policy rate to 1% from 0.75% on June 16, the highest level since 1995, and Deputy Governor Shinichi Uchida said the BOJ would keep raising rates if underlying inflation keeps moving toward target. Reuters also reported that a summary of the BOJ’s June meeting showed some policymakers wanted rates raised faster, with market views still pointing to another hike by year-end.
Even so, the yen has stayed weak because U.S.-Japan rate differentials remain wide and the dollar is still benefiting from a relatively firm U.S. rates backdrop. Reuters reported that USD/JPY was around 161.74 on June 26 and that a move through 161.96 would take the yen to its weakest level since 1986. The same report noted that Tokyo core inflation accelerated in June, which gave the yen some support, but not enough to reverse the broader pressure.
That leaves the pair fundamentally supported by yield differentials, but also vulnerable to intervention rhetoric or a sharper yen rebound if authorities become uncomfortable with fresh highs. This is why the chart remains bullish, but the trade is not low-risk at current levels.
Possible Market Effect
If USD/JPY breaks and holds above 161.88–162.00, the market could quickly test higher levels as momentum traders chase the breakout. If the pair fails near that zone and slips back below 161.40, the move could turn into a sharper corrective pullback, especially given the growing risk of official discomfort with excessive yen weakness.
Trading Signal
Signal: Buy on confirmed breakout
Entry: 161.92
Stop Loss: 161.38
Take Profit 1: 162.20
Take Profit 2: 162.80
This setup favors a controlled bullish trade because the Renko structure is still trending higher, OBV remains supportive, and price is testing the breakout zone rather than already rejecting it decisively. A move back below 161.38 would invalidate the immediate breakout setup.
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