Trading at 20-yr High, Watch for Reversal

USD/JPY Technical Highlights:

• USD/JPY trading at best levels since 2002
• Market is very bullish, could see the rug get pulled
• How the week closes may set up a near-term decline

Overnight, USD/JPY shot above the 2015 high at 12585, up to a high so far of 12631. This put it at its best levels since early 2002. It is currently flirting with losing that level, and on that if we do see a reversal after breaking out to a 20-year high it could catch a lot of market participants wrong-footed.

We obviously got here so fast through a lot of buying, so even without looking at various sentiment indicators one can conclude a lot of folks are long. Looking at one futures indicator, though, DSI (Daily Sentiment Index) shows over 90% have a long bias.

A fake-out breakout above the 2015 high and failure could send USD/JPY into pullback mode. What I will be watching here is for a weekly closing print that’s not only below the 2015 high, but the emphatic spike-high reversal week ending on April 1. That would require a weekly close below 12510.

The combination of a rejection at 20-year highs and weekly close below a key reversal week high could set the tone next week for a pullback to begin. There was a small pullback which caused the reversal week, but a more protracted decline and or consolidation period looks to be in order.

If, however, we see USD/JPY continue to maintain a bid and there is no failure below the above mentioned levels, then indeed we could see more upside. The next major macro level isn’t until the 2002 high just over 13500.

USD/JPY Daily Chart

USD/JPY Weekly Chart

USD/JPY Charts by TradingView

Resources for Forex Traders

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX