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Japanese Yen Technical Analysis: Where Are The USD/JPY Bulls?

Japanese Yen Technical Analysis: Where Are The USD/JPY Bulls?

David Cottle, Analyst


Talking Points:

  • USD/JPY remains in a firm short-term uptrend
  • But it has yet to top its previous highs and the bulls need it to
  • NZD/JPY has bounced nicely but now looks exhausted

Find out what the retail foreign exchange community makes of the Japanese Yen’s chances right now at the DailyFX Sentiment Page

The Japanese Yen seems to be in a bit of trouble if you look at USD/JPY’s daily chart for the last couple of weeks.

The pair has risen fairly consistently since the last week of November and looks reasonably comfortable within the uptrend channel formed from the lows posted back then. The last three days’ torpor can probably be explained away by the fact that the biggest fundamental event left this year is coming up later on Wednesday in the form of the US Federal Reserve’s final 2017 monetary policy conclave.

If you’re currently uncommitted Wednesday’s session might not be the best time to get into this market, at least until we have heard from the US central bank. It’s widely expected to raise interest rates but question of how many more times it might do so in the coming two years is the big one. The prospect of massive tax cuts against the backdrop of a US economy already performing reasonably well may mean that the Fed sounds more hawkish, with more Dollar support the likely result.

And even now, with interest-rate differentials so much in its favour against the Japanese Yen (and much else) the Dollar could do with some support. Because the recent uptrend has yet to come close to the previous peak. That was the 114.75 set on November 5.

On any fundamental basis it seems ludicrous to expect USD/JPY to post a ‘lower high’ when the current uptrend fades out, but USD bulls have their work cut out to top those previous peaks. The news the market is net-long of the Yen at present probably won’t cheer them.

Moreover, there has been a sinister bearish crossover in the moving averages. The 20-day variant has moved below the 50- and this, traditionally, is not a good sign for bulls.

Such indications are not infallible, and obviously USD/JPY has risen since in any case. But USD/JPY bulls will need to retake those previous peaks after the Fed has said its piece.

Meanwhile the New Zealand Dollar has staged a nice little bounce in the past month, and not only against the Japanese currency. Against the Yen, however, the kiwi is starting to look a little overbought. Much like USD/JPY, NZD/JPY seems to be tiring before it can top its most recent peak. However, NZD/JPY look more overbought than USD/JPY and will probably need a period of consolidation now if its gains are to hold.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

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