Yen pairs are much more volatile at the end of the week. JPY is showing strength after the recent Fed move to raise rates to 2.50%. The yen index is up 1.45% at the time of writing this, but heavier moves are expected to come.
Why Yen Is Stronger
Demand for the currency stems from the performance of gold. As gold's price rises, so does the yen. According to Orbex, USD/JPY and gold are -94% correlated, meaning that JPY rises while USD falls during a rise in gold's price.
Gold's recent gains could also be a result of the latest GDP numbers this month. Recessions and geopolitical conflicts tend to favor the price of gold more and both of those events are happening now. Thus, a continual contraction in US output will likely give the yen a boost due to the positive correlation it has with gold and the negative correlation with USD.
Will Yen Keep Climbing?
The yen is historically a risk-off pair, so the uptrend is likely to continue. However, it's harder to tell which risk-off currency is better to choose from. So, it will probably look stronger to investors when stacked against minor currencies or risk-on ones.
Up against the USD, however, JPY does not look promising. We're looking at GBPJPY, EURJPY and CADJPY on the short side while CHFJPY and USDJPY are more questionable.
This pair looks bearish as a potential momentum shift may have occurred on the 1D timeframe. Price is making lower highs and had a fake breakout from a wedge pattern. The pair may test the bottom of the rising trend line in the wedge. If that happens, we should watch for a break underneath and a fall to the 160.500s.
EURJPY has already broke underneath a rising trend line on the 1D timeframe. It also established a lower low which suggests that price wants to continue lower. If the pair closes below that trend line and 136.900s we might see another leg down to the 132.800s.
Similarly to the USD, CAD is looking mostly stronger than the yen. However, price did cross under a falling trend line and is continuing to fall lower. Price maty fall to the 101.900s level before finding support. A double top lies around 107.
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