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Market update: Japanese yen makes a U-turn

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Japanese yen making a U-turn against the US dollar and double top chart pattern in focus on the four-hour.


original-size.webpSource: Bloomberg


Daniel Dubrovsky | Currency Analyst, DailyFX, San Francisco | Publication date: Thursday 24 August 2023 

Yen surges against USD

The Japanese yen might be showing early warning signs that the currency might be getting ready to reverse against the US dollar. Over the past 24 hours, USD/JPY broke under the 145.07 inflection point that was established in late June. This followed the presence of negative relative strength index (RSI) divergence showing fading upside momentum.

That can, at times, precede a turn lower. Now, recent losses have exposed the 20-day moving average (MA) as immediate support. This line may reinstate the near-term upside focus. Otherwise, confirming a breakout below opens the door to extending losses. Still, keep in mind that the rising trendline from March is maintaining the broader bullish technical bias.

USD/JPY daily chart


original-size.webpSource: TradingView

USD/JPY technical analysis

Zooming in on the four-hour chart reveals that a double top chart pattern appears to be in play. Prices have closed under the neckline of around 145.07, and this also followed the emergence of negative RSI divergence. Confirmation is lacking at the time of publishing, but immediate support is the 100-period moving average on this timeframe.

Breaking under the line may open the door to extending losses that the double top could be insinuating. That places the focus on the 38.2% Fibonacci retracement level of 142.99 before the current August low of 141.50 comes into focus. Otherwise, closing above 146.56 opens the door to extending gains towards the 61.8% Fibonacci extension level of 148.27 seen on the daily chart above.

USD/JPY four-hour chart


japan2.pngSource: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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