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Japanese Yen Technical Forecast: USD/JPY Correction Underway

Japanese Yen Technical Forecast: USD/JPY Correction Underway

Michael Boutros, Strategist

Japanese Yen Technical Price Forecast: USD/JPY Weekly Trade Levels

  • Japanese Yen technical trade levels update – Weekly Chart
  • USD/JPY breaks yearly trend support- risk for larger correction
  • Support 137.25-138.48, 136, 131.25 - Resistance 143.61, 146.79-147.65 (key), 152

The US Dollar is attempting to snap a four-week losing streak against the Japanese Yen with USD/JPY up nearly 0.9% since the weekly open. A rebound off technical support may offer a short reprieve but the broader threat for a deeper correction remains after breaking below yearly uptrend support. These are the updated targets and invalidation levels that matter on the USD/JPY weekly price chart. Review my latest Weekly Strategy Webinar for an in -depth breakdown of this USD/JPY technical setup and more.

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Japanese Yen Price Chart – USD/JPY Weekly

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Chart Prepared by Michael Boutros, Technical Strategist; USD/JPY on Tradingview

Technical Outlook: In last month’s Japanese Yen Technical Forecast I noted that the, “USD/JPY rally has responded to technical resistance and threatens a larger correction within the confines of the yearly uptrend.” USD/JPY has now plunged nearly 9% off the yearly highs with the decline breaking below February channel support. Although the move threatens a larger pullback in the weeks ahead, the immediate decline is challenging the upper bounds of a key pivot-zone here at 137.25-138.62- a region defined by the 38.2% retracement of the yearly range, the July high-week close and the 61.8% Fibonacci retracement of the August advance. The focus is on a reaction off this threshold in the days ahead for guidance.

Initial weekly resistance now eyed the 38.2% retracement of the October sell-off at 143.61 with medium-term bearish invalidation now lowered to the 61.8% retracement / 1998 high / 2022 high0week close at 146.79-147.65. A break lower from here would expose parallel support (red dotted-line, currently ~136) backed by the April / May highs around 131.25- both zones of interest for possible downside exhaustion / price inflection IF reached.

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Bottom line: The USD/JPY has broken below yearly uptrend support with the decline already checking the first major pivot zone here around 138. From a trading standpoint, rallies should be capped by 143.61 IF price is indeed heading lower on this stretch with a break / close below parallel support needed to suggest a larger trend reversal may be underway. I’ll publish an updated Japanese Yen Short-term Outlook once we get further clarity on the near-term USD/JPY technical trade levels.

Japanese Yen Trader Sentiment – USD/JPY Price Chart

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  • A summary of IG Client Sentiment shows traders are net-short USD/JPY - the ratio stands at -1.10 (47.55% of traders are long) – typically neutral reading
  • Long positions are 8.53% higher than yesterday and 20.25% higher from last week
  • Short positions are 11.21% higher than yesterday and 33.68% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise. Yet traders are more net-short than yesterday but less net-short from last week and the combination of current positioning / recent changes gives us a further mixed USD/JPY trading bias from a sentiment standpoint.
USD/JPY Mixed
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 4% 11% 7%
Weekly 4% -7% -2%
|Learn how shifts in USD/JPY retail positioning impact trend
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--- Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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