USD/JPY – More buying of US bonds – Fundamental and Technical Analysis

January-October 2021 aggregate data shows that Japanese investors net-bought JPY8.5 trillion of medium to long term US bonds, JPY7.5 trillion of US medium to long term sovereign bonds, JPY964.8 billion of medium to long term US non- sovereign bonds, and JPY5.5 trillion of USD bonds.

Technical Analysis

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USDJPY was correcting sideways inside this descending wedge formed pattern up until March this year when it eventually broke out of it ever since then we have been on a nice bullish trend. So the question isn’t where it is going now, it is what will it do before it continues to rise and potentially reach a long term resistance around the 118.000 handle.

G10 FX volatility should subside once we are through this busy week of key central bank meetings, however, with year-end approaching there is a risk this move higher for USD/JPY might not happen until the new year.

Possibly correct more into the new years

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As our hopes are going up for a continuation possibility for USD/JPY, we may experience some further correction as we are approaching the holiday season. I have spotted a Head & Shoulder pattern which may push the price further down to a possible area of 111.5 which also confluences with the 61.8% Fibonacci Retracement.

Near term bullish potential

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At this current price range, we may witness a classical continuation pattern such as a triangle, flat channel or a flag pattern. A breakout of that pattern would potentially push the price into that designated 118.500 resistance area.