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USDJPY Extends 8-Year Highs, Enters Overbought Territory

Technical Bias: Neutral


  • USDJPY extends 8-year highs, climbing to 123.70.
  • Daily chart shows USDJPY has entered overbought levels.
  • Recommend against entering a long position at this stage from a risk/reward perspective.

The USDJPY rose to new highs on Wednesday, although the bulls stopped short of 124.00 as the pair triggered its first overbought signal in 2015.

The USDJPY traded above 124.00 briefly, reaching a high of 124.06. The pair would subsequently consolidate at 123.70, its highest level since 2007. The USDJPY has been on a tear all week after it finally overcame a six-month range, finally breaking above 122.00. The pair is now targeting the June 2007 high of 124.14. On the downside, initial support is located at 123.30.

The technical outlook is bullish on the 1-hour chart, but given the pair’s unprecedented gains this week, it would be hard to justify a long position from a risk/reward point of view.


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The daily chart clearly shows the USDJPY has entered overbought levels on the RSI.


Screenshot (366)


Bank of Japan Uncertain About Inflation

The Bank of Japan’s lofty inflation target is unlikely to be met any time soon, as the oil price shock continues to weigh on consumer prices. Excluding the impact of last year’s tax hike, Japan’s consumer inflation rate rose just 0.2 percent in March. Some members of the BOJ believe that inflation will not reach its target in fiscal year 2017, despite renewed optimism that private consumption will continue to lift the economy.

The BOJ officially pushed back its timetable for reaching its 2 percent inflation target to fiscal year 2016.

Economic Data

The Japanese government will report on retail trade and large retailer sales on Thursday morning. These data releases could influence price action for the USDJPY, albeit marginally.

The New York session sees the release of US pending home sales and the Energy Information Administration’s weekly inventory report.

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