Yen, US Dollar/Japanese Yen, Euro/Japanese Yen, British Pound/Japanese Pound/Japanese Pound/Japanese Pound/J Points to Consider As US rates have continued to decline, yen strength has become more prominent. The USD/JPY, EUR/JPY, and GBP/JPY all have potential reversal backdrops, which we’ll analyze at below. The article’s analysis is based on price movement and chart formations. Check out our DailyFX Education area to learn more about price action and chart patterns. This morning’s market enthusiasm was sparked by a fast risk-off move that caught many people off guard. Equities around the world retreated, and this trend continued into the US open. But, as we’ve seen with so many other price drops, buyers have come in and prices have rebounded. Outside of the stock market, though, evidence continue to mount that something is afoot. Treasury yields have continued to fall, with the 10-year yield reaching a new four-month low this morning. Stock and bond prices moving in the same direction is unusual, and the stalemate usually doesn’t last long. So, with stock prices remaining around all-time highs and bond prices rising, the major question is, “Which is Right?” The rates motif is more prominent in the currency arena, at least around the Yen. With US rates rising and taking on a more positive tone, Japan’s negative rate policy becomes even more appealing for funding carry bets. However, when rates are squeezed, the opposite can happen, as we’re witnessing in the Japanese Yen right now, as the currency continues to gain as US yields fall. This week’s decline in USD/JPY has been rather dramatic, with the pair losing as much as 200 pips from last week’s highs. Perhaps more intriguing is the context, with the USD/JPY hitting crucial support levels around 110.00 after breaking through a bullish trendline that has held the lows since late April. USD/JPY Four-Hour Price ChartJames Stanley’s chart; USDJPY on Tradingview The Bigger Picture of the USD/JPY Taking a look at the chart again, the sell-off this morning found support at a critical level. Two Fibonacci levels intersect in the area between 109.57 and 109.62, forming a zone of confluence. This has so far kept the retreat at bay, but with a new lower-low to work with, a greater trend shift could be in the cards, especially if the rates theme continues. Following the breach of the trendline, this might leave the door open for lower-high resistance tests around the 110.00 handle for bearish continuation scenarios. Visit DailyFX Education to learn more about Fibonacci. USD/JPY Daily Price ChartJames Stanley’s chart; USDJPY on Tradingview EUR/JPYYen strength has also been on display recently in EUR/JPY, especially after the ECB’s rate decision this morning, which saw the bank modify several policy parameters. Other variables, on the other hand, were weighing heavily this morning, and the net movement in EUR/JPY was downward, as prices dropped through the psychological threshold of 130.00 and eventually found support at a confluent zone of Fibonacci levels around 129.50. For the time being, prices have rallied off that support test and are attempting to reclaim the 130 psychological level, but there are signs of a larger reversal in the pair, similar to USD/JPY above. James Stanley created this EUR/JPY daily price chart; EURJPY on Tradingview GBP/JPYSimilar scenario in GBP/JPY, with Yen strength taking control of the trend. As the yields trend has continued, the pair has pushed down to a new low, similar to the USD/JPY and EUR/JPY above. The difference here is one of context, as the prevalent backdrop in GBP/JPY wasn’t quite as menacing before this morning’s negative push. When prices fell this morning, a familiar area of Fibonacci support came into play, which has served to keep the lows in place so far. This recent pattern of lower-lows and highs, as seen above, keeps the door open for greater reversal themes. GBP/JPY Daily Price ChartJames Stanley’s chart; GBPJPY on Tradingview—- James Stanley, Senior Strategist at DailyFX.com, wrote this article. James Stanley can be reached via Twitter at @JStanleyFX./n
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