Japanese Yen Technical Analysis: Massive Fractions in USD / JPY, AUD / JPY, CAD / JPY

Japanese Yen, JPY, USD / JPY, AUD / JPY, CAD / JPY

  • The Japanese Yen has been on an astonishing course of weakness over the past two weeks, with multi-year highs pushing across the USD / JPY, AUD / JPY and CAD / JPY.
  • The big question is why and the only logical reason is central bank divergence, with the Bank of Japan sitting on weak and loose monetary policy while other economies are preparing for interest rate hikes to fight inflation. As rates run in USD, CAD or AUD, the attractiveness of carry trade increase against the low-rate yen, and this could push the top in those pairings further. This is the same theme that was in play in K1 and K4 from last year, but with even more emphasis.
  • The analysis contained in article relies on price action and graph formations. To learn more about price action or chart patterns, check out our techlives Education section.

The Japanese Yen is still being hammered and breakouts in a number of JPY pairs have pushed up to fresh perennial bends. The major driver appears to be continued central bank divergence, with the Fed ready for as many as five or six further increases this year and many other central banks also want to raise rates to buffer inflation. Meanwhile, the Bank of Japan does not seem to be close to the same scenario and this has made the attractiveness of wire transactions so much more attractive.

It’s very similar to a theme we looked at in Q1 of last year and again in Q4, right around the time Powell and the Fed started warming markets for rate hikes in 2022. At that rate decision of September 2021, the Fed pointed to only one hike for 2022. But markets were pretty sure it would not do the thing and USD strength continued to progress in anticipation of a larger falconry shift at the Fed.

It showed in November when Jerome Powell was on the verge of renaming above the Fed. At his confirmation hearing, he even said that the bank wants to withdraw the word ‘perishable’, which they used to ignore inflation throughout last year. It has only raised the expectation of a more hawkish Fed and it has grown even more since then.

The breakout in USD / JPY was astounding. I last looked JPY settings two weeks ago before the outbreak startedand the top move was above my expectations.

USD / JPY Four Hour Price Chart: Rising Triangle Breakout

Graph prepared by James Stanley; USD / JPY on Tradingview

USD / JPY Long Term

Perhaps most impressive is what this move looks like on the longer-term USD / JPY chart. From the monthly below we can see that price action is finally resolved above a group of resistance that has been in the game for some time. And the momentum shown on this monthly bar refers back to 2012 or 2014, when Abenomics drove Yen weakness across the FX complex.

If we are on the verge of another of those trends, which has also been driven by central bank divergence, we could all be in a very fun summer in the Forex market.

USD / JPY Monthly Price Chart

USDJPY Monthly Price Chart

Graph prepared by James Stanley; USD / JPY on Tradingview


While the USD was volatile for much of March, the Australian dollar remained strong. I have been favoring AUD above USD lately, largely based on the performance of AUD / USD which looked down in February.

But that additional AUD strength was also fully displayed in AUD / JPY. However, the historical connotations are not as deep as we see in the USD / JPY major.

When I last looked at AUD / JPY a few weeks ago, it was working on a possible outbreak beyond the psychological level of 85.00. It has a similar rising triangle theme that was brewing at the time, and that formation resolved with an aggressive upward movement. At this point, it has also already taken out the 90s handle, on its way to a new high of 6.5 years.

Chasing here can present challenges as the move is overbought; but there is some support potential around the 90 large fig would develop a retreat. And while that level is more than 150 pips away from current market prices, it’s important to remember that when volatility increases which can work on both sides of the issue, pullbacks as well as momentum movements.

AUD / JPY Weekly Price Chart

AUDJPY price chart

Graph prepared by James Stanley; AUD/ JPY on Tradingview

CAD / JPY on a dash

CAD / JPY is currently working on his 12ste consecutive daily profit. From short-term maps, this appears to be a stratospheric run. And given the oil exposure of the CAD combined with JPY weakness, there is even a fundamental background for this move to be built.

The concern here will be in the longer term, as prices now venture to a previous place of support. It makes me even more wary to pursue the theme higher, as prices are now overbought and the long-term resistance potential is daring. There is also the psychologist 100-level in that neighborhood, which contributes to that context.

CAD / JPY Monthly Chart

CADJPY Monthly Chart

Graph prepared by James Stanley; CAD/ JPY on Tradingview

— Written by James Stanley, Senior Strategist for

Contact and follow James on Twitter: @JStanleyFX

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