USD/YEN blinks

At Tricio we look at charts in order to gauge investor sentiment and behaviour. The suggestion by US Treasury Secretary Bessent that the Bank of Japan should follow ‘sound monetary policy’ rocked the Yen on Tuesday, with the spot rate moving from Y153.25 probes on Monday to working below Y152 early Tuesday. Small beer stuff really for anyone other than a very short-term FX trader.

But, from small acorns mighty oaks grow, right? Well, obviously most acorns don’t turn into oak trees, but small FX moves can signal something big might be developing.

First, the context. The chart below is the weekly chart of USD/JPY from 2009, with 13 and 50-week moving averages and a 14-week RSI. The yen weakened from Y75.55 to near Y162 over this time period. As we have pointed out in many of our publications, webinars and podcasts, this JPY weakness has been seen against regional and many other cross rates. We have been looking for this to change for some time now, and believe that the Y162 approach in 2024 marks a potential long-term top in USD/JPY. Confirmation of a big top and reversal still needs a sustained drop below the Y140 area (flattish red line). When seen, our Y125/Y120 targets (big flat purple line area and below) will get a lot of technical confirmation. Fans of our FX podcasts will remember that John Calverley, Tricio’s Chief Economist, has been pointing to 3% potential in 10-yr. JGB yields. This might trigger Y110/Y100 moves in the spot rate over time. 

The chart below is the daily USD/JPY chart with 20, 60 and 250-day moving averages and a 14-day RSI. The ‘blink’ seen so far today makes the Y153.25 area pretty strong resistance. A sustained push above this area would leave falling line resistance just above Y154 under pressure. If this line gives way then Y160/Y162 would be key, with the next big levels at Y170/Y175 ahead of Y180 and Y200.

We are leaning to a USD tumble below the 20-day moving average near Y151.10 instead, which should set up Y150 next. The 250-day moving average near Y149.20 would be key below this, then the 60-day moving average just below this near Y148.80. The 17^th October low near Y149.35 in this zone is important support to watch as the midpoint of a potential double top. If all of these support levels give way, then Y145 probes should follow. This has been a sticky area in the past, and needs to give way to shift the focus to Y142/140 area support. Breaking below the latter on a sustained basis has been difficult since late 2023. When seen though, USD/JPY bear views will become a lot more popular.

Gerry Celaya, Chief Strategist