USD/JPY retraces from weekly highs towards 118.50s

• The Japanese yen recover some ground vs. the greenback but stays vulnerable above 118.00.
• US equities ended with gains, while the greenback edges lower on an upbeat market mood.
• USD/JPY Price Forecast: The uptrend remains intact but a correction towards the 116.35-117.00 area is on the cards.

USD/JPY pares Wednesday’s gains as it is headed down as the greenback remains soft as New York’s session is about to end amid a positive market mood, which witnessed US equities rallying. At 118.63, the yen strengthens vs. the buck.

Positive market sentiment benefits US equities finishing with gains

US equities finished on the right foot, confirming the upbeat mood, while investors assessed the first rate hike of the US central bank in three years. Alongside that, Russia and Ukraine’s “peace talks” continue, though they failed to deliver what the market players hope, a ceasefire and an agreement that could keep the world in peace. Meanwhile, US Secretary Blinken claimed that Russia could be preparing chemical weapons in a false-flag operation that could justify Russia’s escalation of its attacks on Ukraine.

The headline impact was barely-noticed in the financial markets, though the USD/JPY  retreated from highs 118.60s to 118.50.

The US Dollar Index, a gauge of the greenback’s value against a basket of six rivals, grinds lower 0.60%, sitting at 98.02, while the 10-year benchmark note drops two basis points, down at 2.167%, a headwind for the USD/JPY.

Macroeconomic-wise, the US docket featured Initial Jobless Claims for the week ending on March 12, which came at 214K, lower than the 220K expected, while Industrial Production for February showed some strength, rose by 7.5%y/y  higher than the 3.6% previous reading.

On the Japanese front, on Friday, the Bank of Japan would reveal its monetary policy decision, widely expected at -0.10%, and would keep supporting the Japanese economy.

Read more: BoJ Preview: Forecasts from seven major banks, a dovish hold

USD/JPY Price Forecast: Technical outlook

The USD/JPY daily chart shows that the pair remains uptrend. Thursday’s retracement is seesawing around January 17, 2017 resistance/support at 118.61, and in the event of recording a daily close above it, would leave the JPY vulnerable for further upside.

If that scenario plays out, the USD/JPY first resistance would be 118.61. Breach of the latter would expose the 119.00 mark, followed by 120.00, and January 25, 2017, high at 121.68.

In the case of a correction, the USD/JPY first support would be 118.00. Once cleared, the next demand zone would be the top-side of the 24-year-old downslope trendline around 117.00, followed by 116.35.