USDJPY at Risk: Trend Reversal or Bearish Continuation?

Fundamental Analysis

Japanese Yen Strength

• The JPY remains supported by rising expectations that the Bank of Japan (BoJ) will continue its rate hike cycle.
• Recent statements from Governor Kazuo Ueda and Deputy Governor Himino reinforce the possibility of further adjustments if inflation and growth align with projections.
• The 10-year Japanese bond yield has reached levels not seen since 2010, reflecting expectations of a more restrictive monetary policy.

US Dollar Weakness & Policy Divergence

• The USD is under pressure due to expectations that the Federal Reserve (Fed) will maintain its current stance and eventually cut rates in 2025.
• The narrowing interest rate differential between Japan and the US has favoured capital flows into the JPY.
• The release of the FOMC minutes will be key in determining the USD/JPY direction, as they may provide clearer signals about the Fed’s future monetary policy.

Geopolitical Factors & Market Sentiment

• The recent meeting between US and Russian officials in Saudi Arabia to discuss the war in Ukraine could impact global risk perception.
• A delay in implementing new US tariffs has fueled a higher appetite for risk, limiting the JPY’s demand as a safe-haven asset.
• Despite these factors, the current USD/JPY trend suggests resistance to further upside while the BoJ continues tightening its policy.

Technical Analysis

USD/JPY – H4

• Supply Zones (Sell): 152.64 // 154.22 // 155.25
• Demand Zones (Buy): 151.76

• The pair has been in a bearish phase since January, with the last validated daily resistance at the February high of 155.88.
• This structure is contained within a descending linear regression channel, with weekly volume concentrations at higher levels, confirming clear supply zones (sell).
• However, a moderate shift has been observed since last week when a lower POC formed around 151.96 and was slightly broken with minimal downside.
• Price consolidation around 151.76 suggests a potential reversal scenario.
• A decisive break above the upper channel limit would be the first sign of bullish exhaustion, confirmed by breaking the last validated daily resistance at 155.88.
• If the price drops below 151.00, the bullish scenario will be invalidated, and the 154.80 level (last validated daily resistance) will act as a reference for a potential trend shift.

Technical Summary

Bullish Scenario:

• Buy opportunities above the weekly volume concentration at 151.76, targeting the daily POC at 152.64, from where a pullback towards 151.76 may occur.
• A decisive break above 152.64 could extend the rally towards 154.00 and 154.22.

Bearish Continuation Scenario:

• A decisive break below 151.76 and 151.40 would signal stronger bearish control, confirmed by breaking the 151.21 support.
• In this case, selling pressure could extend towards 150.00 and 149.00, the December lows.

Always wait for the formation and confirmation of an Exhaustion/Reversal Pattern (ERP) on M5 before entering a trade in the key zones indicated.

Discovered POC:

• POC = Point of Control: The level or zone where the highest volume concentration occurred.
• If a bearish move originated from this level, it is considered a sell zone (resistance).
• If a bullish impulse originated from this level, it is considered a buy zone (support)