USDJPY Technical Analysis – Watch out for this bullish flag pattern


  • The Fed hiked by 25 bps as
    expected and kept everything unchanged.
  • Fed Chair Powell reaffirmed their data dependency
    and kept all the options on the table.
  • The US economic data keeps on surprising to the
    upside, but inflation expectations and CPI readings continue to show
    disinflation with the last two Core CPI M/M figures
    coming in at 0.16%.
  • The US PMIs missed
    expectations across the board and brought down Treasury yields weakening the US
    Dollar, but the US Jobless Claims came out
    better than expected once again and supported the USD.
  • At the moment, the market doesn’t expect another
    hike from the Fed, but the next NFP and CPI data will be crucial to confirm or
    change this view.


  • The BoJ kept everything unchanged as expected but implicitly tweaked
    the YCC policy keeping the target band unchanged but giving more flexibility
    with a hard cap at 1.00%.
  • They basically widened the YCC band
    without stating it explicitly.
  • This has created lots of volatility
    in the JPY, but eventually led to a fast depreciation.
  • The BoJ has also already intervened
    twice to smooth the rise in yields ultimately weighing on the JPY.
  • Last week, the Japanese CPI data surprised to the upside with
    the core-core reading reaching again the previous high.
  • Today, the Tokyo CPI, which is seen as a leading
    indicator for national cpi, missed expectations, but the core-core reading
    matched the prior figure remaining well above the BoJ’s inflation target.

USDJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see
that USDJPY started to consolidate just above the broken high at the 145.00
handle. The pair remains firmly in an uptrend as the price keeps printing
higher highs and higher lows with the moving averages being
crossed to the upside. The market might be waiting for some fresh catalyst for
the next major move, so paying attention to the data will be key.

USDJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price has
been diverging with the
MACD for a
long time. This is generally a sign of weakening momentum often followed by
pullbacks or reversals. In this case, we got a pullback into the 145.00 support where we
had also the confluence with the
38.2% Fibonacci retracement level.
The buyers piled in with a defined risk below the support zone to target a new
higher high.

USDJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have a top trendline that
is acting as resistance. This might turn into a bullish flag
pattern, so a break to the upside should see more buyers piling in and take the
price to new highs. The sellers, on the other hand, might lean on this
trendline to position for a downside move into the 145.00 support zone and then
pile in even more aggressively in case the price breaks through the support.

Upcoming Events

Today the only major
event is Fed Chair Powell’s speech at the Jackson Hole Symposium. The
expectations though are for him to take a “wait and see” approach as we have
more key economic data ahead before the next FOMC meeting.

See also the video below:

This article was written by FL Contributors at Source