The US dollar pair has smashed past the 130.00 level against the Japanese yen currency this morning for the first time in year as the non-stop bid tone in the USDJPY shows few signs of stopping.
A move higher intraday of over 1 percent is underway and is accelerating its bullish momentum, with the USDJPY pair having climbed above 130.00 for the first time since 2002.
The slump in the yen got accentuated after the Bank of Japan backed its ultra-loose monetary policy, while effectively doubling down on bond purchases. This is the opposite of the FED.
The Japanese central bank left the key policy settings unadjusted but pledged to buy unlimited bonds at fixed-rate every business day to defend the 0.25% yield cap on 10-year Japanese Government Bonds (JGB).
The BOJ’s dovish stance widened the yield differential between the US and Japan, as the Fed remain on track for double-dose rate hikes at its May and June meetings. Things could get worse.
According to the ActivTrader Market Sentiment tool shows that some 73% of traders are bearish towards the USDJPY pair. This is a near 15% weekly decrease, and it should be noted that retail have been on the wrong side of this trade for over 500 points now.
Considering that the pair is rising above the 130.00 level and the breakout in the buck, and the massive sentiment bias, I think we could probably see more upside ahead in the USDJPY pair towards the 132.00 area.
USDJPY Short-Term Technical Analysis
Technical analysis on the four-hour time frame shows that the USDJPY pair has formed massive amount of negative MACD price divergence in two key areas on the price chart.
The USDJPY pair currently has negative MACD price divergence extending down towards the 127.50 area. Traders need to be careful if this divergence starts to reverse, because it could an epic reversal.
USDJPY Medium-Term Technical Analysis
The daily time frame is showing that the USDJPY pair has invalidated a huge head and shoulders pattern, and also staged a massive trendline breakout after clearing the 124.00 level.
It is also noteworthy that the Alligator Williams indicator is issuing a buy signal. This indicator is famous for finding meaningful price trends. Bears need to be careful while the buy signal is on.