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Talking Points:

  • USD/JPY has seen good upside this week
  • Its old trading range is history, or possible support
  • EUR/JPY is respecting a nascent uptrend channel

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The Japanese Yen was hammered by a generally-stronger US Dollar this week. Indeed, it has been on the receiving end of notable punishment.

Fundamentally speaking this is no surprise. Powered by a combination of worries about inflation, and interest-rate rises, US ten-year Treasury yields have hit 3% for the first time in more than four years. By contrast, Japan’s equivalents yield a miserly 0.05%- as a direct result of ongoing yield-curve repression by the Bank of Japan. Small wonder then that the yield differential now yawning should burnish the US Dollar’s charms at the expense of the Yen’s.

Technically speaking USD/JPY has left its old trading range far behind in the last couple of days. In place since early April it was broken on Monday when the Dollar broke up through JPY107.78.

Japanese Yen Technical Analysis:Feb's USD/JPY Peaks Back In Play

Bulls now appear to be taking aim at the 109.30 region which was February 9’s intraday top. If they can beat that on a daily-closing basis (and they haven’t yet) then February 2’s peak of 109.52 will beckon as the next probable upside target. That will probably look more compelling and sustainable following a period of consolidation, however.

Near-term support levels are difficult to spot with any conviction right now given the rapid nature of USD/JPY’s gains. However, the upper limit of that old trading range looks likely. It comes in at 107.78, quite a way below the market.

The Euro has also been gaining against the Japanese currency, with the market still rigorously respecting an uptrend channel, which has bounded the action since late March.

Japanese Yen Technical Analysis:Feb's USD/JPY Peaks Back In Play

Be aware, however, that the channel’s resistance uptrend may be a little spurious. After all, it has only been tested once and that test came quite early in the channel’s existence. A more truthful and tradeable picture may be gleaned from viewing this, newer uptrend range, which seems to have been more faithfully adhered to, both to the upside and the down.

Japanese Yen Technical Analysis:Feb's USD/JPY Peaks Back In Play

It suggests that current support lies around JPY132.31, with resistance at JPY134.08.

Resources for Traders

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

--- Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!