Making Sense of Japanese Yen’s Recent Slide: Is it the Start of a Renewed Leg Lower?

US Dollar, Japanese Yen, USD/JPY – Price Action:

Earlier this month, USD/JPY rose above the key 138.00 resistance.However, it might be premature to assume the start of renewed period of USD/JPY strength.What is the outlook for USD/JPY and what are the signposts to watch?

Recommended by Manish Jaradi

How to Trade USD/JPY

There are a couple of things that stand out on the charts of the Japanese yen against the US dollar and the closely correlated US Treasury yields recently that could have implications for the trend in the coming weeks.

On the monthly charts of USD/JPY, despite the near 10% rally from February, there is hardly any noticeable improvement in momentum (14-month Relative Strength Index). The last time a similar development took place, the spot subsequently went sideways for months. Such conditions typically signify an ‘unwinding’ of bullish conditions, instead of a renewed leg higher. Eventually, momentum normalized to a level that created the foundations in 2021 for a big rally.

USD/JPY Monthly Chart

Chart Created Using TradingView

This time around, USD/JPY has achieved its measured target of 50.00 – equal to the 2012-2015 bullish move. So, in a sense, it has ‘done its part’ for now (the risk is that the extension turns out to be more than 100% of the move).

US Treasury 10-year Yield Weekly Chart


Chart Created Using TradingView

Similarly, momentum (14-month RSI) on the US Treasury 10-year yield monthly chart hasn’t improved materially, even as the yield has most recently broken above key resistance at the April high of 3.64%. The yield continues to be in a well-established downward-sloping range (see the weekly chart).

USD/JPY Quarterly Chart


Chart Created Using TradingView

From a longer-term perspective, as highlighted at the end of 2022 (see “Japanese Yen Q1 Technical Forecast: USD/JPY to Consolidate Further”, USD/JPY posted a bearish reversal candle on the quarterly charts in December at significant converged resistance. Similarly, the US Treasury 10-year yield has struggled to clear the stiff converged barrier on the 89-quarter moving average, near the upper edge of the Ichimoku channel on the quarterly charts.

US Treasury 10-year Yield Quarterly Chart


Chart Created Using TradingView

The upshot of the above is that the break above 138.00 barrier may not be a sign of renewed strength in USD/JPY. Indeed, it could be part of a broader sideway range developing. If past is any guide, there needs to be a significant build-up in momentum or the bullish conditions would need to be unwound enough to set the stage for a renewed bullish cycle.

USD/JPY Daily Chart


Chart Created Using TradingView

Having said that, there are no imminent signs of a reversal even as USD/JPY has encountered some hurdles, including the upper edge of a rising channel from January (see the daily chart). As the colour-coded 240-minute candlestick charts show, based on trending/momentum indicators, USD/JPY remains in a broad bullish phase from a short-term perspective. Unless it falls below immediate converged support at 137.75-138.50 (including the 89-period moving average and the early-May high), the path of least resistance remains sideways to up for now.

USD/JPY 240-minute Chart


Chart Created by Manish Jaradi Using TradingView

Note: In the above colour-coded charts, Blue candles represent a Bullish phase. Red candles represent a Bearish phase. Grey candles serve as Consolidation phases (within a Bullish or a Bearish phase), but sometimes they tend to form at the end of a trend. Note: Candle colors are not predictive – they merely state what the current trend is. Indeed, the candle color can change in the next bar. False patterns can occur around the 200-period moving average, or around a support/resistance and/or in sideways/choppy market. The author does not guarantee the accuracy of the information. Past performance is not indicative of future performance. Users of the information do so at their own risk.

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— Written by Manish Jaradi, Strategist for

— Contact and follow Jaradi on Twitter: @JaradiManish

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