This April turned out to be the most challenging time for the Japanese yen – the asset plummeted to its 20-year lows against the US dollar. On Monday, 25 April, the yen was trading at 128.55, while the last week’s high was 129.39.
The difference in interest rates of the US and Japanese Central banks makes USD/JPY attractive to carry trade investors. At the same time, there is no reasonable basis for expecting the Bank of Japan to revise its monetary policy in the nearest future: the regulator’s monetary tools haven’t been able to beat deflation so far, and the national debt increase can’t go on and on.
The demand for the yen as a “safe haven” asset, which might help it reach stability, is very low. The yen will remain weak for a while, although its further devaluation is limited.
As we can see in the H4 chart, having formed a new consolidation range around 125.75, broken it to the upside, and finished the ascending wave at 129.50, USD/JPY has completed the first descending impulse at 127.58 along with the correction towards 129.00.
Possibly, the asset may start a new decline with the target at 126.26 or even expect this structure down to 125.75. From the technical point of view, this scenario is confirmed by MACD Oscillator: its signal line is falling to reach 0, a breakout of which may lead to another decline towards new lows.
In the H1 chart, after completing the correction at 129.11, USD/JPY is forming another correctional descending wave, the third one, towards 127.58. Possibly, the asset may break the latter level and continue trading downwards with the short-term target at 126.21.
From the technical point of view, this scenario is confirmed by the Stochastic Oscillator: after breaking 50 to the downside, its signal line is expected to continue moving towards 20.
Disclaimer
Any forecasts contained herein are based on the author's particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.
