Japanese Yen Price Action Setups: USD/JPY, EUR/JPY, AUD/JPY
Original author: James Stanley
Source: Forex Factory (https://www.forexfactory.com/news/1367379-japanese-yen-price-action-setups-usdjpy-eurjpy-audjpy)
The Japanese yen continues exhibiting significant volatility across several key Forex pairs. Following recent economic data and statements from the Bank of Japan (BoJ), the JPY has been under pressure, prompting traders to reassess both near-term trends and long-term implications. In this analysis, we review notable price action setups on three major yen pairs: USD/JPY, EUR/JPY, and AUD/JPY. Each pair has its own technical traits, but the overarching trend showcases yen weakness, building on broader global macroeconomic themes.
Backdrop: Yen Weakness and Fundamental Considerations
The Japanese yen has historically been a go-to safe-haven currency, often appreciating during risk-off scenarios. However, recent developments have weakened its defensive appeal:
– The BoJ has maintained an ultra-loose monetary policy even as other major central banks, including the US Federal Reserve and the European Central Bank, have raised interest rates to combat inflation.
– Inflation in Japan has been gradually rising, giving rise to speculation about a potential tightening cycle by the BoJ. Nevertheless, Japanese officials have yet to signal a clear shift.
– Speculation around currency intervention by Japanese authorities continues to emerge, especially as USD/JPY approaches or breaches key psychological levels such as 150 or 155.
The divergence between dovish BoJ policy and hawkish stances elsewhere has created fertile ground for yen-based setups, as the currency remains relatively weak against peers like the USD, EUR, and AUD.
USD/JPY Price Setup: In Search of Resistance
USD/JPY has continued to consolidate near multi-decade highs as the yen struggles against the stronger greenback. Despite Japan’s efforts to talk down the pair, there has been little substantial follow-through to counter the USD’s long-term strength.
Key Technical Observations:
– USD/JPY recently flirted with the 155 level, a historically sensitive area that has previously evoked concern from Japanese policymakers.
– The pair is testing resistance near 155 within a symmetrical triangle formation that reflects narrowing volatility and growing indecision.
– While near-term consolidation is evident, the broader trend remains bullish, driven by yield differentials and ongoing US economic strength.
Technical Support and Resistance Levels:
– Resistance:
– 155.00: A major psychological marker and potential intervention zone.
– 155.20-155.40: Upper bound of the triangle structure; a breakout here could open the door to fresh multi-year highs.
– Support:
– 152.25-152.40: Near-term support. A hold above this zone keeps bulls in control.
– 150.00: Psychological support and the site of previous BoJ verbal intervention.
Traders should watch whether USD/JPY can resolve its triangle pattern to the upside. A successful break of 155 could point to a continuation move higher, whereas a downside reversal might suggest that verbal or actual intervention is putting downward pressure on price.
EUR/JPY Price Setup: Momentum at Extreme Highs
EUR/JPY has seen a relentless uptrend, with bulls driving the pair to levels not seen in more than 15 years. The pair’s trajectory reflects both yen softness and euro resilience, aided by the ECB’s relatively hawkish outlook.
Key Technical Observations:
– The pair recently pushed to its highest level since 2008, trading above 165.00.
– Despite its extended overbought positioning on RSI (Relative Strength Index), the trend remains constructive.
– The potential formation of a rising wedge hints at diminishing bullish momentum over time, suggesting a possible correction or pause on the horizon.
Technical Support and Resistance Levels:
– Resistance:
– 165.00: Round number and recent price high.
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Explore this further here: USD/JPY trading.