USD/JPY PRICE ANALYSIS: IS ANOTHER TOP FORMING?

• The USD/JPY has climbed back to near previous peaks above 150, could this be a sign it is topping?
• Indicators remain mostly ambivalent and price action relatively muted so it’s too early to say. 
• Rumors the BoJ may be about to raise interest rates have stimulated talk of a USD/JPY breakdown

The USD/JPY pair has been a broad, sweeping sideways trend since peaking in October 2022. Although higher lows have suggested an underlying bullish bias the pair has failed to surpass the 2022 highs, indicating an overall balanced market. 

Recent rumors that the Bank of Japan (BoJ) could be preparing to raise interest rates have reignited speculative interest in the Yen and led many to hail a renaissance in the currency. 

Japan’s negative interest rates have long made the Yen a popular funding currency for the carry trade. This is an operation in which investors borrow in a currency with a low interest rate, like the JPY, and use the relatively cheap loan to fund the purchase of a currency with a higher interest rate, such as the US Dollar (USD), pocketing the difference in rates as profit. Over time this has acted as a negative factor for JPY and driven the USD/JPY to new highs. 

From a technical perspective the pair overall remains in a sideways trend, with some bearish signs appearing on the horizon. 

As can be seen on the weekly chart above, after peaking at 150.84 last week, USD/JPY has entered the zone of previous major highs in the 151s – possibly a sign it is topping – however, there has so far been insufficient downside price action to definitively say it is rolling over. 

The lack of upside momentum, however, is a sign the uptrend could be waning. The Moving Average Convergence/Divergence (MACD) has shown much less progress higher during the 2024 rally compared to the 2023 rally, suggesting bulls are tired. Still, without a concomitant decline in price as well, the long-term technical conclusion is neutral