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The USDJPY price looks to be forming a reversal pattern, could this offer a retracement opportunity?

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USDJPY Analysis

The price of USDJPY has been trending to the upside since the low formed in 2020, this has been advanced significantly in recent months due to the inflation rates rising. Due to the inflation rate the Federal Reserve began to hike rates and the Bank of Japan decided to leave rates unchanged. This differential in policy has seen the USDJPY rate rally higher. When looking at USDJPY in the past we have often referred to the US 10YR due to the strong positive correlation between the two instruments. When the US 10YR rallies, the USDJPY price follows, when it falls, the USDJPY follows so it is important to note that recently the US 10YR has fallen. This means that we could see the USDJPY price move lower too. 


Looking at the weekly chart we can see the price is starting to close back within the previous week’s highs after an impulsive move. This is one sign of a market move becoming exhaustive and is when we can often see a reversal form. Going down to the daily chart we can see the price forming a bearish rejection at the previous high where sellers entered the market previously. Moving down another time frame to the 4hr we can see selling coming from those highs. If investors have sold from here before we can look to see if this area will find selling pressure again. If the price retests the zone and forms bearish price action we could see further opportunities for the market to fall.

Have you seen our recent EURUSD video? You can view it here.

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