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

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

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

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.