USD/JPY Price Analysis: Shorts about to be squeezed as buyers eye 140.00

• USD/JPY extended its rally for the seventh consecutive week, gaining some 2.19%.
• The USD/JPY negative divergence in the daily chart might pave the way for a pullback.
• A rising wedge remains in play and, once broken, targets the USD/JPY might fall towards 130.00.

The USD/JPY reached a fresh 24-year high around 139.38, though of late dipped near the 139.10s area, as market participants scaled back expectations of a 100 bps rate hike following Wednesday’s hot US CPI reading, which opened the door for speculations of the aforementioned. At the time of writing, the USD/JPY is trading at 139.03, recording a minimal gain of 0.03%.

USD/JPY Thursday’s session began around the 137.50 figure, near the bottom of a rising wedge, and rallied sharply towards a fresh 24-year high at 139.38. However, the major retreated near 138.50 before launching a renewed assault above 139.00, where the price settled near the end of the New York session.

USD/JPY Daily chart

The USD/JPY daily chart remains upward biased, though price action looks overextended due to the parabolic rally, which began around March 2022. Oscillators are again entering overbought conditions, illustrating a negative divergence, which means that price action is printing higher highs, while the Relative Strength Index (RSI) is registering lower peaks, opening the door for a pullback.

Therefore, if the above scenario plays out, the USD/JPY's first support would be July 14 daily low at 137.28. A breach of the latter will send the pair tumbling towards the July 6 low at 134.94, followed by the June 16 cycle low at 131.49.

USD/JPY Key Technical Levels