The USD/JPY pair broke lower after the price reversed from a head and shoulders formation. The neckline gave way after the cryptocurrency market had a rough weekend, with the price of Bitcoin losing more than 15% in a flash crash that scared investors.
The Japanese yen is seen as a safe-haven currency, so the market participants turned their attention to the yen and the Swiss franc. On top of that, the Japanese yen may benefit from a recent announcement made by one of the largest pension funds in the world – the Government Pension Investment Fund (GPIF).
In April, the fund announced that it will increase its allocation in foreign bonds, and will decrease the one in domestic bonds. The move should put pressure on the price of bonds, and thus the rising yields should benefit the currency.
USD/JPY Technical Analysis
The head and shoulders pattern formed at the top of a rising trend that dominated the price action in the recent months. The USD/JPY pair rose from 102 to over 110 with literally no meaningful retracements.
The move lower will likely attract more sellers. Therefore, bears may want to sell the pair short with a stop above the neckline and target 107 or below.
USD/JPY Price Forecast
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