The historically 'safe' currency to hold in times of recessions is in a unique situation now with a couple factors in place. Here is why the yen is stronger today as well as some trade setups that could push its value either up or down.
The Bank of Japan has been consistently keeping the yen in a weaker state for a long time now as interest rates still remain negative. Keeping yields low and easing is all part of the process to bring strength back to Japan's currency over time. A major focus that BOJ governor, Haruhiko Kuroda, is economic recovery, so spending must be ample.
The yen is also subject to volatile swings in either direction. And as long as rates keep causing depreciation, investors will likely be short. However, should investors see a light at the end of the tunnel (which could be happening now), JPY might be priced higher and cause a surge in price.
Against the USD, however, it may not find a good enough advantage than if it were to be paired against a country like Canada, Europe or UK. Here are some setups that could be bullish for yen should the rally continue.
Pound-yen can't seem to break above what is now a triple top on the 1D timeframe. The pair seems to be ranging from the upward trend line to this top which is creating a sort of wedge pattern. The yen's recent strength could take price back down to the trend line for a third test.
CADJPY works its way down as oil demand weakened and BOJ hints at working towards tighter policy. Price is nearing support around 102.700s with additional support from a rising trend line on the 1D timeframe. A break under this trend line could take price lower towards the 98.400s.
EJ looks similar to GJ except for the double top on this chart. Price came down today and is also nearing a rising trend line paired with support on the 1D timeframe. Price could come down to test those levels again. Now that there is a double top, price may struggle to break higher than the 144s.
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