The US dollar is breaking higher against the Japanese yen currency ahead of a pivotal week for the USDJPY pair, with inflation results coming from the United States being the main market watch point this week.
Traders are also debating that the Bank of Japan is going to start to raise interest rates and inflation ramps up in the Land of The Rising Sun. This previously drove much USDJPY speculation.
A closely watched section of Japan’s yield curve steepened to the most in over six years, suggesting speculation has eased over tweaks to the Bank of Japan’s super-easy monetary policy.
The spread between five- and 10-year yields climbed to 24 basis points, the highest since the BOJ introduced its negative-rate policy in January 2016, according to Bloomberg data. The five-year yield has retreated in recent weeks, while the 10-year equivalent remains close to the 0.25% ceiling tolerated by the central bank.
The reality this week is that the Japanese GDP report is going to be worth watching. Negative GDP figures are expected, this makes it incredibly difficult for the BOJ to raise rates.
According to the ActivTrader Market Sentiment tool shows that some 71% of traders are bearish towards the USDJPY pair. This is good for the upside in the USDJPY pair and could prompt more upside.
Considering that the pair is breaking towards the 131.00 level, and the massive sentiment bias, I think we could probably see more upside ahead in the USDJPY pair towards the 132.00 area or even a new yearly high.
USDJPY Short-Term Technical Analysis
Technical analysis on the four-hour time frame shows that the USDJPY pair has started to move above its key moving averages, and the 50-day MA could soon crossover the 200-day MA.
The USDJPY pair certainly looks like it could be forming a massive reversal pattern. The price will need to get above the 131.20 level before the potential bullish pattern is activated.
USDJPY Medium-Term Technical Analysis
The daily time frame is showing that the USDJPY pair has recovered above its 50-day moving average and is now creating positive momentum to the upside in this instance.
It is also noteworthy that the crossover of the 50-day moving average is significant and has been in play this year and really gave a strong signal that the USDJPY pair could be about to breakout.