The US dollar has staged a recovery against the Japanese yen currency as the greenback started to fight back against all major currency pairs in quiet Bank Holiday trading conditions.
One of the big reasons that the USDJPY pair was one of the major movers on the FX market on Monday was due to new Central Bank Governor Ueada not making any new policy moves.
In fact, the new Bank of Japan Governor, Kazuo Ueda, said on Monday that they want to avoid a sudden normalisation in monetary policy as it would cause a big impact on markets,
More temporary upside in the USDJPY pair is likely if the Fed pull away from the pivot narrative as suggested in the Fed Funds rate after the latest NFP jobs report. In such a scenario the USDJPY pair could easily hit higher levels.
The key thing to watch this week is that the trend remains long-term bearish while price trades under the 137.00 level. However, while the price holds above the 132.00 level it could be said that buying corrections in the USDJPY pair is the preferred way forward.
According to the ActivTrader Market Sentiment tool some 50% of traders are bearish towards the USDJPY pair and the other 50% are bullish, which strongly hints that we could see range trading.
With retail traders or participants are neutral we did see some fairly sizable price moves on Monday for a market that is supposed to be range bound.
USDJPY Short-Term Technical Analysis
Technical analysis on the four-hour time frame shows that the USDJPY pair has broken above the Ichimoku Cloud and is close to turned short-term bullish above its 200-period moving average.
According to the location of the 200-period moving average then a break above the 133.70 level should be considered extremely bullish for the USDJPY pair.
USDJPY Medium-Term Technical Analysis
The daily time frame is showing that the USDJPY pair has formed a large a large head and shoulders style pattern. These are amongst the most reliable bearish reversal patterns, and it has been invalidated.
According to Ichimoku analysis the price is working its way through the Ichimoku Cloud. Technical analysis always mentions not trading asset classes when they are trapped inside the cloud.
Better to wait for a trend change of the price moves past the 137.00 level or a rejection from the top of the Cloud.