Sage Investment Club

  • A recovery in investors’ risk appetite has led to a correction in USD/JPY.
  • The volatility is contracting amid an Ascending Triangle formation.
  • The 21-EMA is continuously providing support to the US Dollar.

The USD/JPY pair has corrected gradually to near 130.15 after printing a fresh three-day high at 130.89 on Monday. The asset has corrected due to a recovery in investors’ risk-taking capacity. The risk-appetite theme has gained traction as the S&P500 futures have recovered losses recorded in early Asia. The major has remained volatile amid chatters over Bank of Japan (BOJ) Governor Haruhiko Kuroda’s successor.

The US Dollar Index (DXY) has slipped to near 101.50 after surrendering the critical support of 101.60. Losing traction for safe-haven assets has faded the risk aversion theme.

USD/JPY is demonstrating signs of volatility contraction amid the formation of the Ascending Triangle chart pattern on an hourly scale. The major is near the upward-sloping trendline of the chart pattern plotted from January 19 low at 127.76. While the horizontal resistance is placed from January 18 high around 131.58.

The 21-period Exponential Moving Average (EMA) at 130.35 is providing support to the US Dollar.

Meanwhile, the Relative Strength Index (RSI) (14) has slipped into the 40.00-60.00 range, portraying a loss in the upside momentum.

Should the asset break below Monday’s low around 129.00, Japanese Yen bulls will drag the asset towards January 19 low at 127.76 followed by January 16 low at 127.22.

On the contrary, a breakout of the chart pattern after exploding January 18 high around 131.58 will drive the asset towards January 9 high at 132.65. A break above the latter will expose the asset for more upside towards January 5 high around 134.00.

USD/JPY hourly chart


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