Fundamental Analysis

  • The USD/JPY pair is showing signs of a reversal near 160, with sell signals such as the "Evening Star" pattern appearing. The market is currently characterized by high volatility and a range-bound state, heavily influenced by the fluctuating situation in Iran. While a downside breakout of the current triangle pattern could lead to a drop toward the 157 level, the medium-to-long-term outlook remains "buy on dips" as long as energy security concerns persist. Traders should remain cautious of potential Yen appreciation if tensions ease, while watching for a decisive breakout.

Dependent on the Iran Situation The USD/JPY shows signs of a reversal after peaking near 160. Technical indicators suggest a slowdown, with the appearance of a "bearish engulfing line" near the highs and an "Evening Star" (a three-bar reversal pattern consisting of a bullish candle, a spinning top, and a bearish candle), which serves as a sell signal. Although it has not yet broken out of its consolidation range, the upward momentum has clearly hit a brake.

As the situation in Iran changes daily, the market lacks a clear direction, leading to increased volatility. If crude oil prices stabilize, the weakening of the yen may also subside. However, a key issue is the inconsistency in communications from the U.S., making it difficult to discern which information is reliable.

Even if USD/JPY declines, it will likely settle around the 157 level, where the 52-day moving average sits. Since Israel appears unlikely to cease military actions, attacks on Iran will probably continue for the time being. As long as the conflict persists, concerns over energy security will remain. Middle-to-long-term, this should be viewed as a phase for buying on dips.

[USD/JPY Daily Chart]

Consolidation Triangle Looking at the 1-hour chart, a symmetrical triangle pattern has emerged. According to the ADX, downward momentum seems to be strengthening slightly. With higher lows and lower highs, we should be alert for a breakout.

If the situation in Iran settles, there is a possibility of Yen appreciation due to position adjustments. If the pair breaks out below the triangle, we should consider a scenario where it drops to the mid-157 range.

As long as the price remains within the triangle, a range trading strategy with buy entries on the trendline is considered. Basically, the strategy is to look for the right timing to buy on dips.

[USD/JPY 1-Hour Chart]