Talking Points:

  • The Yen is quietly but implacably strengthening against the US Dollar
  • USD/JPY has moved into a modestly lower range in the last week or so
  • The Australian Dollar is doing a lot better against the Japanese currency

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The Japanese Yen has arguably been busy doing, if not nothing, then nothing much against the US Dollar on a daily basis ever since May 16 and 17’s sharp slide.

The 28 sessions since have seen relatively narrow, range-bound trade between 111.80 to the upside and 109.28 to the down. The range may have been made slightly lower by June 6’s fall to 109.38. This looks like near-term support to conjure with, incidentally, as it also held falls on Wednesday of this week, and provided a platform for subsequent gains.

Technical Analysis: Japanese Yen Stronger Than It Might Look

However, if we take a look further back, this harmless looking meander assumes a more sinister form, at least for USD/JPY bulls.

An impressive run of gains froim April 17 to May 10 snapped a downtrend which had been in place since March 10. However, another downtrend soon asserted itself which has been threatened but not yet conclusively broken by the past two sessions’ gains.

Technical Analysis: Japanese Yen Stronger Than It Might Look

Looking at the above the most likely scenario is that USD/JPY continues to drift lazily lower. The problem, again for bulls, is that support line you can see at the bottom of that chart. It represents the lows for the year so far, made on April 18.

The trend strognly suggests that that prop will face a retest, possibly quite shortly. If it cannot hold then we would be back to lows not seen since November 2016 and, possibly, a threat to the whole climb up from the 99.90 area seen in the months before that.

It’s probably worth noting that USD/JPY doesn’t look obviously overbought or oversold at this point, which may suggest that extreme moves either way will face resistance.

Things look a lot better for the Australian Dollar against the Japanese currency.

AUD/JPY has turned in a nice run of gains, stretching now to nine of the last eleven trading sessions. However, celebrations may yet be premature. The 2017 downtrend remains in place, and seems likely to for some time. It comes it at around JPY85.20 at the moment, appreciably above current price levels.

Technical Analysis: Japanese Yen Stronger Than It Might Look

Still, the cross is very close to previous highs, made on May 18 in the mid JPY84 area. Some daily or weekly closes above those might go a long way to shore up confidence.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter:@DavidCottleFX