The US dollar has still been rising fast the Japanese yen currency as the move higher in the dollar causes the USDJPY pair to move above the 140.00 handle at breakneck speed this week.
As the USDJPY pair continues to rise traders are now looking towards higher numbers such as 147.00 and 150.00. This scenario is possible if we see the US dollar index touching 114.00 or even 115.00 over the coming days and week.
The reason that we are currently seeing this much strength in the dollar against the yen is purely because of the difference in two central banks, namely the Bank of Japan and the Federal Reserve.
Lat months Jackson Hole meeting highlighted that the Fed is as hawkish as it can be, and the BoJ still doesn’t seem to be bothered much about inflation or changing its stance on monetary policy.
With the USDJPY pair at a twenty-four year high some officials are worried about the big drop in the Yen. Japan’s finance minister, Shunichi Suzuki has expressed concern about the yen’s drop.
Shunichi Suzuki has said “For now, we’re monitoring with a sense of urgency how it’s developing, but if this continues, it makes sense that we will take necessary measures”. This hints at intervention.
According to the ActivTrader Market Sentiment tool some 70% of traders are bearish towards the USDJPY pair, which strongly hints that retail could be in for more pain this week.
I suspect until we see the retail traders or participants starting to turn bullish again we are probably going to see the USDJPY just heading higher.
USDJPY Short-Term Technical Analysis
Technical analysis on the four-hour time frame shows that the USDJPY pair has formed a large amount of negative price divergence across the MACD price indicator.
According to the overall size of the bearish MACD price divergence we could expect a drop towards 138.00. A bullish inverted head and shoulders is also pointing towards 148.00 next.
USDJPY Medium-Term Technical Analysis
The daily time frame is showing that the USDJPY pair has formed a near perfect head and shoulders pattern. These are amongst the most reliable bearish reversal patterns, and it has been invalidated.
According to the size of the invalidated price pattern we are likely going to see some type of run towards the 148.00 or 150.00 level.