JPY TECHNICAL FORECAST: BEARISH

Higher yields and growth concerns see the JPY underperforming across the FX spaceUSD/JPY, GBP/JPY, and EUR/JPY technical levels

The Japanese Yen is the strong outperformer in current FX markets as stronger yields weigh on the currency. Even with a slightly softer dollar across the board, USD/JPY continues to push higher towards the 3-year high at 114.55.

The RSI is showing overbought conditions but it is still under the levels seen back in March and April when we saw a corrective pullback and so the reversal doesn’t seem to be imminent. Bullish momentum is likely to run a little longer with 115 yen per dollar in sight, a level not seen since March 2017. Back then the pair was coming down from a yearly peak, but even then buyers were unable to break past 119. Looking at the weekly chart it is clear that USD/JPY has faced rejection at current levels on many occasions, most notably in 2017 and 2018, meaning the path higher isn’t going to be an easy one.

USD/JPY Weekly Chart

GBP/JPY has also been powering through key levels and is now above the 2018 high (156.67). The next point of reference from here is the area around 160.0 which saw some short-term volatility back in 2016, with 163.92 being the top of the range back then. The short-term outlook remains pretty bullish but there may need to be a corrective pullback before further gains are achievable. That said, it’s hard to see GBP/JPY as a short at the moment if the pair is able to hold above 155.

GBP/JPY Daily Chart

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Meanwhile, EUR/JPY is finding it harder to prolong its recent strong bullish trajectory. The pair is still a way off their yearly highs (134) and the RSI is close to being at its most overbought level in a year, meaning resistance could be lining up along the way to 134 yen per euro. That said, as long as the pair holds above 132.40 then another leg higher is likely, with a move below 130.80 needed to start considering a wider bearish move.

EUR/JPY Daily Chart

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— Written by Daniela Sabin Hathorn, Market Analyst

Follow Daniela on Twitter @HathornSabin

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