USD/JPY: Earthquake Fallout and Technical Signals Shape Trading

USD/JPY: Earthquake Fallout and Technical Signals Shape Trading Dynamics


The Japanese Yen (JPY) faces early selling pressure on the first trading day of 2024, weighed down by the aftermath of a devastating earthquake in central Japan. This unfortunate event, coupled with a recovering US Dollar (USD) and rising US Treasury bond yields, contributes to the USD/JPY pair distancing itself from recent lows.

Earthquake Impact and Thin Trading Volumes:

The seismic tremors in central Japan cast a shadow on the domestic currency, influencing market sentiment in a day marked by relatively thin trading volumes. The immediate impact on the Japanese Yen underscores the complexities of external factors impacting currency movements, adding a layer of unpredictability to the trading landscape.

Technical Analysis and Bearish Signals:

Examining the technical landscape, the USD/JPY pair remains ensconced within a bearish channel. Notably, the price appears to be consolidating in a range suggestive of a Bearish flag. Analysts are eyeing this pattern as a precursor to a potential fresh bearish impulse, particularly around the resistance area highlighted in the chart. The prevailing idea is one of bearish continuation in the short term.

BoJ Policy Expectations:

Amid the current dynamics, it's important to consider the expectations surrounding the Bank of Japan's (BoJ) policy stance. While external factors weigh on the Yen, expectations of an imminent policy shift by the BoJ act as a mitigating factor, potentially limiting deeper losses for the Japanese currency.


Our preference

Short positions below 143.000 with targets at 139.90 & 138.50 in extension.