Since Monday, Feb. 13, the USD/JPY currency pair has been in a slight upward movement, which at times has been as high as 3%. The USD/JPY is now facing an extremely important resistance level, which has already formed the starting point for strong movements several times last year.
Today, the US dollar moved slightly up by 0.33% against the yen. Thus, the price has moved during the day at times above the resistance level just mentioned in the range of 134.30-134.70 yen, but then showed rather weak in the afternoon.
If the USD/JPY should overcome the resistance level in the new week, we could see new rises, initially towards 136 yen. This should then also invalidate the bearflag formation and a reverse could form as the starting point of a new recovery movement after the correction from the October high.
Otherwise, the resistance could be tested successfully and a downward movement could follow. Investors could target price values around 132 yen. If the downward movement really runs that far, the current recovery should also be considered a bearflag.
Economists at BNP Paribas Research also expect the USD/JPY to fall to 121 in the long term. With signs of repatriation flows such as rising yields in Japan and a possible end to USD strength soon, portfolio flows for the US dollar could become increasingly negative.
