The US dollar traded at its highest level since March 2020 against the Japanese yen currency yesterday after buyers finally moved the pair past the technically important 111.00 resistance level.
Aside from the US dollar, the Japanese yen have been the worst performing currency on the foreign exchange market this week. This is unusual as the greenback has been busy giving back a sizable portion of its hard fought monthly gains.
Risk-on trading sentiment and soft economic data has meant that the Japanese yen currency is being shunned against other major currencies. The notion that the Bank of Japan is way behind other major central banks in terms of tapering QE could be another rising why the yen is being sold.
Looking across the foreign exchange market the euro, British pound, New Zealand dollar, Australian dollar, Canadian dollar, and US dollar have all made strong gains against the Japanese yen currency this week.
Traders looking for trends may not need to look too far if other major central banks start to taper QE and the BOJ keeps its foot on the printer. Buying major currencies against the yen could be the smart move. Furthermore, the USDJPY pair could be about to move into a new multi-year high trading range after staging a major trendline breakout on the weekly time frame.
According to the ActivTrader Market Sentiment tool some 69% of traders are bearish towards the pair. Bearish sentiment has increased since last week despite the pair advancing sharply. Watch out for further heavy losses while bearish sentiment remains unusually high or continues to increase.
USDJPY Short-Term Technical Analysis
Technical analysis on the four-hour time frame shows that USDJPY pair has invalidated a large head and shoulders pattern, with the pattern holding a 130-point target.
Now that bulls have invalidate the pattern after moving the price above the 111.00 level, watch out for a coming rally towards the 112.30 level. This would mark a near eight-month high for the pair.
USDJPY Medium-Term Technical Analysis
The daily time frame is showing that a much larger bearish head and shoulders pattern has been invalidated, with the pattern holding 250 points of upside potential.
Now the break has taken place above the 110.90 level, a potential rally towards the 113.50 level is possible. Traders also need to closely watch the trading action around a key multi-year trendline, near the 110.00 level, for a clear medium-term price guide.