Japanese Yen Technical Analysis: USD/JPY, EUR/JPY, GBP/JPY

Japanese Yen Talking Points:

• USD/JPY has held support at 142.50 and has now rallied into 145.00 after a brutal week and a half last week, driven by a spike in long-dated Japanese yields.
• As Japanese yields have softened this week, USD/JPY has taken a step back and the pair has rallied up to that key psychological level. The pair continued to sway USD themes as the prospect of wider carry unwind could lead to more USD-weakness; but with JGB yields paring back that worry is a bit less today than it was last week.
• I remain of the mind that there’s more attractive backdrops for both Yen-weakness and Yen-strength themes via GBP/JPY and EUR/JPY, respectively. I look at all three markets in each weekly webinar, and you’re welcome to join the next. Click here to register.

USD/JPY is back up to the 145.00 level following a strong week and a half sell-off into last week’s close. The push point behind that move, surging long-term Japanese yields, has taken a step back and accordingly USD/JPY has, as well. In last Friday’s video I looked at the importance of the 145.00 level and that price is now in-play. For USD/JPY bears, this represents an opportunity to jump in on the matter after a pullback from the prior sell-off. But – if bulls can force the pair above the big figure, that would be an attractive sign of recovery that could further help broader USD-strength themes.

Above 145.00, it’s the 145.92 level and that’s followed by the trendline projection taken from the 2021 and 2024 swing lows, and that trendline is currently confluent with the 146.54 prior swing low.

 

USD/JPY Daily Price Chart

Chart prepared by James Stanley; data derived from Tradingview

 

USD/JPY Weekly/Monthly

 

I looked into this in-depth in yesterday’s webinar regarding the U.S. Dollar, but so far we’ve seen USD bulls hold a higher-low following last week’s sell-off. This also relates to USD/JPY, as we’ve seen support hold at 142.50 and that’s on the heels of the April low at the 140.00 handle. Bulls still have their work cut out for them, however, as there’s a batch of resistance now overhead that they will have to chew through to exhibit greater control. But, if we are on the cusp of a greater USD turn, DXY will probably need some help from the USD/JPY pair.

Nonetheless, for Yen-bears there could be a more attractive venue elsewhere, in GBP/JPY. Or, for Yen bulls looking to fade USD/JPY off 145.00, EUR/JPY could present a more attractive backdrop. Each market is looked at below.

USD/JPY Weekly Chart

Chart prepared by James Stanley; data derived from Tradingview

 

GBP/JPY

 

For Yen-weakness, I continue to favor GBP/JPY. GBP/USD just broke out to a fresh three-year-high and the strength exhibited by Sterling in the major pair has similarly shown in GBP/JPY, which set a fresh four-month high just two weeks ago. As the Yen-strength theme took over, driven by spiking Japanese yields, GBP/JPY remained a bit more restrained than USD/JPY as the GBP/JPY pair simply pulled back to test a higher low at the 192.64 level of support. Last Thursday and Friday saw that price tested on an intra-day basis twice, with a higher-low printing on the second test, and that has since led to another breakout back above the 195.00 level.

 

GBP/JPY Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

 

GBP/JPY

 

With the pair testing above the 195.00 level it can be difficult to chase from here. But, there is support potential at a key spot, taken from around the 193.61-193.75 zone. Even more aggressive would be bulls holding a higher-low above last night’s swing low of 194.39, which I would consider as an ‘s2’ spot of support, with the prior zone functioning as an ‘s3.’ And for ‘s1,’ I would consider a hold at 195.00 as an even more aggressive show from bulls, which would keep the door open to topside momentum strategies in the pair.

 

GBP/JPY Four-Hour Chart

Chart prepared by James Stanley; data derived from Tradingview

 

EUR/JPY

 

For Yen-strength scenarios, or for those looking to fade USD/JPY off of the 145.00 level, EUR/JPY presents a compelling scenario.

As Yen trends have been visible against both the US Dollar and British Pound over the past few months, EUR/JPY has largely been stalled at a major spot on the chart, taken from the 163.00 level up to the 163.38 Fibonacci level. That zone has now traded for 11 consecutive weeks, and still bulls haven’t been able to make a lasting mark on the matter even as GBP/JPY has rallied by more than 1,000 pips from the April lows.

Longer-term, there remains a bearish lean in EUR/JPY as the pair is holding on to a descending triangle formation, and if we are to see Yen-strength take back over, I like the backdrop against the Euro more so than what was looked at above in the U.S. Dollar.

 

EUR/JPY Weekly Price Chart

Chart prepared by James Stanley; data derived from Tradingview

 

--- written by James Stanley, Senior Strategist