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Japanese Yen Outlook Into 2020, USD/JPY Eyes Bearish Confirmation?

Japanese Yen Outlook Into 2020, USD/JPY Eyes Bearish Confirmation?

Daniel Dubrovsky, Contributing Senior Strategist

Want to read the full forecast? Check out the Q4 Japanese Yen outlook here

Towards the end of 2015, the Japanese Yen launched an offensive against the US Dollar which took USD/JPY from a peak of 125.85 down to 99.00 by the middle of 2016. What followed was an aggressive rally that gave the currency pair a boost higher to 118.67 before year-end.

Since then, the Japanese Yen’s behavior has been more restrained. While it proceeded to rise against the US Dollar, its path has been filled with periods of consolidation. What this means is that the descent in USD/JPY from 118.67, versus its relatively quick top from 125.85, has been going on for almost three years.

Over this period, when the pair experienced its ups and downs, what started to emerge was a symmetrical triangle formation. This is a pattern that in this instance, carries with it bearish continuation prospects. That would be the resumption of the dominant downtrend that occurred at the end of 2015 from 125.85 to 99.00.

During the third quarter of 2019, USD/JPY broke under this candlestick formation, which is underpinning bearish signals. If this Symmetrical Triangle keeps seeing follow-through, this may pave the way for a resumption of the dominant downtrend that occurred about 4 years ago.

Yet, support has been reinforced at the 2018 low around 104.67. This area proved to be of much interest for buyers and helped stave off further USD/JPY declines. Clearing this psychological barrier could carry with it significant implications. On the other hand, is there anything that could invalidate this long-term setup?

USD/JPY Monthly Chart

Monthly USDJPY Price Chart

Chart Created Using TradingView

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