The USDJPY pair has been moving in a strong upward trend since the beginning of the year. On the last day of March, the quotations established the maximum of this year at the level of 110.95.

  • Inside bar on the daily chart
  • downward divergence on MACD
  • yields on US10YR are falling
USDJPY D1 – inside bar at the top, the price has already broken out the bottom, on the MACD divergence suggests further declines

April started with declines, on the daily chart the candlestick formation – Inside bar – appeared.
On Monday the prices broke out from the formation, creating a downward divergence on the MACD oscillator. This is a strong signal to begin correction of this year’s growths. An attractive level for opening a short position (SELL) would be a retest of the lower limit of the defeated inside bar.

USDJPY H4 – price left the inside bar to the downside and may go to the S/R 109.35 level.

On the H4 chart we can see that the local S/R level located at 109.35 ( green line) can be a target for supply. Its defeat will direct quotations to the nearest demand zone located at the level of 108.50-108.30.

A factor having a big influence on the Japanese yen quotations are the US bonds.
We observed an increase in yields (cheapening) of US 10-year bonds from 0.55% in August 2020 to 1.72% at the end of March 2021, i.e. by over 200%. Investors were getting rid of an asset that offers no protection against the expected upcoming high inflation. Japanese bonds at that time have a yield of 0.11% which encouraged investors to invest in US bonds.

US Government Bonds – USGG10YR

However, since the first days of April we have noticed a slow change in the trend, today the yield fell to 1.65% and the yen started to strengthen against the USD. It is worth to observe the US10YR yield curve – it may determine future movements on the USDJPY pair, as well as on gold (GOLD), the Swiss franc – CHF and EUR. All these instruments may gain against the USD in the nearest future.

Recommended:

Price Action Formations – Bearish Engulfing

GOLD- upward correction on the demand zone – 15.03.2021

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