USD/JPY Technical Analysis: Trading at 20-yr High, Watch for Reversal
USD/JPY Technical Highlights:
- USD/JPY trading at best levels since 2002
- Market is very bullish, could see the rug get pulled
- How the week closes may set up a near-term decline
Overnight, USD/JPY shot above the 2015 high at 12585, up to a high so far of 12631. This put it at its best levels since early 2002. It is currently flirting with losing that level, and on that if we do see a reversal after breaking out to a 20-year high it could catch a lot of market participants wrong-footed.
We obviously got here so fast through a lot of buying, so even without looking at various sentiment indicators one can conclude a lot of folks are long. Looking at one futures indicator, though, DSI (Daily Sentiment Index) shows over 90% have a long bias.
A fake-out breakout above the 2015 high and failure could send USD/JPY into pullback mode. What I will be watching here is for a weekly closing print that’s not only below the 2015 high, but the emphatic spike-high reversal week ending on April 1. That would require a weekly close below 12510.
The combination of a rejection at 20-year highs and weekly close below a key reversal week high could set the tone next week for a pullback to begin. There was a small pullback which caused the reversal week, but a more protracted decline and or consolidation period looks to be in order.
If, however, we see USD/JPY continue to maintain a bid and there is no failure below the above mentioned levels, then indeed we could see more upside. The next major macro level isn’t until the 2002 high just over 13500.
USD/JPY Daily Chart
USD/JPY Weekly Chart
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.