The USDJPY has gone sideways.
After moving up nearly 1620 pips from the February 24 low to the high last Thursday (44 trading days), and 1780 pips from the 2022 low reached on January 24, the price range this week is only 86 pips. The market is taking a breather in this pair as trader ponder if it went too far too fast. It is also awaiting the FOMC rate decision at 2 PM ET for bias clues going forward (and honestly the markets reaction in treasury rates, etc).
Looking at the hourly chart below, the consolidation has flattened and now tilted the direction of the 100 hour MA (blue line) to the downside. That MA is currently at 130.192. Traders will be using the 100 hour MA as a short term barometer for bullish and bearish bias. Stay below is bearish. Move above is bullish.
On more downside momentum, the next target is at the 38.2% of the last move higher from the April 27 low at 129.59. That 38.2% retracement is also the low from Monday.
Move below that level, and the 129.39 area is home to the old swing high from April 20 before the surge above that high last week. The price corrected toward that level on Friday, but found support buyers near the level.
The rising 200 hour MA (green line) at 129.21 would be another key target to get to and through, if the sellers are to take back more control. Absent those moves, and the buyers would still hold more control in the intermediate term (although the short term would be in the sellers favor).
Conversely, a move back above the 100 hour MA at 130.192 would tilt the short term bias (and keep the intermediate term bias) back in the buyers direction.
The high for the week at 130.49 would be the next target. That high is joined by a swing high from Friday as well (see red numbered circles). Move above those levels, and traders will be looking toward the cycle high at 131.246. That high was also the highest level since 2002 (20 year high). Trading above 20 year highs is hard to ignore. For you guy, the high price from 2002 reached 135.16. As a result any new high above 131.246 would still be a 20 year high for the pair until 135.16.
A catalyst for the strength in the USDJPY has been the yield spread between US and JPY rates. Looking at the 10 year yield spread, the spread has reached the highest level since December 2018 at 278 basis points. That is still below the 2018 high at 312 basis points but up sharply from the 2020 low at 49 basis points and the 2022 low at 146 basis points.
