USD/JPY Bulls Targeting 125.272 – 125.847

The Dollar/Yen is trading at a six-year high on Monday, and headed for its biggest monthly loss since 2016 after the Bank of Japan moved to contain rising bond yields, even as U.S. Treasury yields soared to new multi-year highs.

Essentially the move means the spread between U.S. Government bond yields and Japanese Government bond yields is widening, which is making the U.S. Dollar a more attractive asset.

At 09:11 GMT, the USD/JPY is trading 124.602, up 2.508 or +2.05%. On Friday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $76.76, up $0.12 or +0.15%.

According to Reuters, the Bank of Japan has pledged to keep policy loose, in contrast with most other major central banks which are in rate hike mode, especially the U.S. Federal Reserve which is widely expected to deliver a half-point interest rate rise in May.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend resumed when buyers took out Friday’s closing price reversal top at 122.437. The trend will change to down when sellers take out the nearest swing bottom at 114.651.

Daily Swing Chart Technical Forecast

Today’s move is all about news driven momentum. The first sign of bullish momentum was the failure to confirm Friday’s potentially bearish closing price reversal top. The second sign of bullish momentum was the move through 122.437, which negated the chart pattern and signaled a resumption of the uptrend.

The third sign of momentum was the drive through the December 18, 2015 main top at 123.536. If this move continues to generate enough upside momentum, then we could see a test of the August 12, 2015 main top at 125.272 and the June 5, 2015 main top at 125.847.

Given the strong momentum, the nearest support is the old top including the December 18, 2015 main top at 123.536 and the January 29, 2016 main top at 121.678.

It’s too early to come up with retracement level support but currently, the 50% level from the 113.472 main bottom is at 119.287.

The potential resistance at 125.272 to 125.847 could stop the rally, but don’t expect a major retracement to the downside unless a closing price reversal top is formed. This chart pattern tends to kill vertical moves.