Japanese Yen Outlook: USD/JPY Breaks Out in Style
By Matt Simpson, Market Analyst - 21/07/2026
Overview
The USD/JPY currency pair has recently broken higher, indicating a persistent weakness in the Japanese yen. This movement is attributed to a combination of easing bearish sentiment towards the yen and a strong performance by the US dollar, particularly in light of recent geopolitical tensions in the Middle East.
Market Dynamics
As the USD/JPY breaks out from a compression pattern beneath its 39-year high, the sentiment surrounding the Japanese yen has shifted. The latest Commitment of Traders (COT) report shows a reduction in net-short positions against the yen, which alleviates some pressure on bearish positions and supports the bullish breakout of USD/JPY.
Technical Analysis
Following the breakout, the USD/JPY is testing a trendline resistance that aligns with recent highs. If this resistance is breached, the next targets for bullish traders could be the monthly R1 pivot at 163.72 and 165.30. However, there are signs of potential near-term pullbacks, as indicated by bearish RSI divergences on the 1-hour chart.
GBP/JPY and CAD/JPY Insights
The GBP/JPY pair is showing bullish momentum, with prices retracing to key support levels. The analysis suggests that as long as GBP/JPY remains above 217.50, there is a strong possibility of reaching 219.00, with additional resistance levels noted at 219.036 and 219.61.
Conversely, the CAD/JPY pair is facing challenges due to an evening star bearish reversal pattern forming around the 116.00 level. While rising crude oil prices could support the Canadian dollar, the overall outlook remains cautious, especially if geopolitical tensions ease and oil prices decline.
Conclusion
The current market conditions suggest a favorable environment for USD/JPY bulls, while GBP/JPY remains bullish as well. However, CAD/JPY's outlook is more complex, hinging on crude oil price movements. Traders should remain vigilant of these dynamics as they navigate the forex market.
Source: FOREX.com