Japanese Yen Price Action Setups: USD/JPY, EUR/JPY, GBP/JPY, AUD/JPY

Japanese Yen Talking Points:

• Yen-weakness has come back in a very big way and fresh multi-year highs have printed on all of USD/JPY, EUR/JPY and AUD/JPY.
• The door was seemingly opening to this trend late last week and I discussed this in the weekly forecast on the US Dollar, focusing bearish currency scenarios towards the Yen, and that caught another shot-in-the-arm early this week on the heels of some comments from BoJ Governor Kuroda.
• The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

Japanese Yen weakness has come back to markets in a very big way over the past week. This was one of the most prominent trends in early-2022 trade as markets geared up for rate hikes from pretty much everywhere other than Japan.

While the US was seeing surging inflation and there were signs that the theme was starting to show elsewhere, in Europe, the U.K., and Australia, Japan didn’t have that same problem and this allowed for the BoJ to keep rates low and policy loose as trading counterparts were forced to adjust. This led to a blistering trend in USD/JPY as the pair jumped up to fresh 20-year highs; but after USD/JPY hit the 130.00 psychological level, matters began to slow, and the spot of 131.25 specifically was the area that twice caught the high in the pair, in April and May before prices posed a turn-around.

But, that turn-around was brief as USD/JPY cauterized support around the 127.00 level in late-May before Yen-sellers showed up again around last week’s open.

Already, USD/JPY has taken out the prior high on the way up to a fresh 20-year-high, and a number of other Yen-pairs are showing similar movement, which we’ll look at below.

USD/JPY Daily Price Chart:

Chart prepared by James Stanley; USD/JPY on Tradingview

EUR/JPY

I had written about this matter yesterday, highlighting the growing expectations for rate hikes out of the Europe to overlay with that lack of interest in hikes out of Japan and the BoJ. This reinforced a bullish bias on the pair from a fundamental standpoint and, yesterday, USD/JPY was posturing just below the seven-year-high at 141.05 with eyes on a breakout.

That breakout hit overnight and the pair is now trading at fresh seven-year-highs. The European Central Bank meets for a rate decision that’s set to be announced on Thursday, and if we do see some additional Euro-strength on the back of the bank’s projections.

What’s interesting here is context, with price still somewhat nearby that prior point of resistance. This can keep the door open for support potential at that 141.05 spot or, perhaps even the 140.00 psychological level if that can’t hold.

One item of note is the increasing strength of the trend which is evidenced below by the two trendlines, with the more recent drawing showing a significant pick-up in momentum. That level is currently confluent with the 141.05 spot.

EUR/JPY Four-Hour Price Chart

Chart prepared by James Stanley; EUR/JPY on Tradingview

GBP/JPY

Come for the extreme volatility, stick around for the reversals…

GBP/JPY has been in the midst of some dramatic moves. In a three-week-period surrounding the May open the pair gave up more than 1,200 pips, finally finding some support just above the 155 psychological level. The pair has since clawed back more than 1,000 of those pips on its way back up towards resistance.

The high that printed in late-April is at the 61.8% Fibonacci retracement of the 2015-2016 major move in the pair. We’re still about 200 pips away from an interaction there, so initially, there’s potential for a pullback if we see sellers show up at a lower-high. But, if buyers are able to force the move there may be scope for breakout potential, similar to what showed in EUR/JPY at its seven-year-high overnight.

But, from where we’re at now, if looking for pullback themes in the Yen, GBP/JPY may be one of the more interesting pairs as it’s not at a fresh high, even as USD/JPY, EUR/JPY and AUD/JPY are.

GBP/JPY Weekly Price Chart

Chart prepared by James Stanley; GBP/JPY on Tradingview

AUD/JPY

AUD/JPY hit a fresh seven-year-high overnight as the RBA hiked rates by 50 basis points. This exposes that fundamental divergence very well as the Aussie is backed by expectations for higher rates while the Yen is not. I had discussed this concept in the US Dollar Technical Forecast for this week. Why would I talk about Aussie or the Yen when discussing the USD? To find trends in majors, and at that point, the Australian Dollar put in a strong showing last week, even gaining against the USD, while the Japanese Yen was weak against most major currencies. That deviation allowed for more attractive scenarios of Yen weakness against the US Dollar, or, possibly even AUD strength against the USD.

Collectively this has helped AUD/JPY to push up to that fresh seven-year-high and, at this point, prices remain above the key psychological level of 95.00. This can be a difficult area to chase and, instead, traders may want to try to exercise some patience in the effort of catching a pullback.

AUD/JPY Daily Price Chart

Chart prepared by James Stanley; AUD/JPY on Tradingview

— Written by James Stanley, Senior Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX