Insight into the top signal of USD/JPY
2025-05-15
■ Despite the sharp rebound in USD/JPY, the recovery of the US dollar index lacked strength.
■ Against the backdrop of the yen's weakening willingness to appreciate, the USD/JPY exhibited a V-shaped reversal pattern. Attention is focused on whether it will form a top.
Since the United States announced the details of the "mutual tariffs" on April 2, the USD/JPY has fallen sharply from the mid-150 yen high, hitting a low of late 139 yen on the 22nd. However, the USD/JPY rebounded due to expectations of easing US-China trade frictions, President Trump's denial of firing Federal Reserve Chairman Powell, and a decrease in market concerns regarding the US demand to correct yen depreciation. Subsequently, the United States reached a trade agreement with the United Kingdom on May 8 and an agreement with China on the 12th to reduce the 115% tariff rate. Market risk sentiment improved significantly, and the USD/JPY rose sharply to the late 148 yen.
In the foreign exchange options market, the yen call option spread narrowed in the one-month risk reversal of the USD/JPY, indicating a decline in demand for yen call options used to hedge against the downside risk of the USD/JPY. Among the IMM currency futures positions held by the Chicago Mercantile Exchange (CME), the long yen positions held by the non-commercial sector (the so-called speculative funds) are at an all-time high. If this portion of the positions is unwound, the market remains concerned that yen depreciation may accelerate further. Additionally, expectations for further interest rate hikes by the Bank of Japan have subsided, and the timeline for further interest rate cuts by the Federal Reserve has been postponed to between July and September. The interest rate differential between Japan and the United States supports the strengthening of the US dollar and the weakening of the yen.
The US dollar index has rebounded since hitting a three-year low of 97.921 on April 21, rising to a high of 101.977 on May 12. From the daily Ichimoku Kinko Hyo, ① the K-line fell sharply below the cloud layer, ② the turning line is roughly the same as the baseline but is generally below it, and ③ the Chikou line before the 26th is also below the K-line, forming a "typical three-fight reversal," indicating that the depreciation trend of the US dollar still exists. Since the euro accounts for 57% of the US dollar index, if the euro returns to an appreciation trend, it will suppress the upward trend of the US dollar. In determining whether USD/JPY will form a "V-shaped bottom," a graphic pattern representing a sharp drop followed by a sharp rise, it is important to focus on whether the April 2 high of 150.48 yen and the March 28 high of 151.21 yen will form the top.
■ Against the backdrop of the yen's weakening willingness to appreciate, the USD/JPY exhibited a V-shaped reversal pattern. Attention is focused on whether it will form a top.
Since the United States announced the details of the "mutual tariffs" on April 2, the USD/JPY has fallen sharply from the mid-150 yen high, hitting a low of late 139 yen on the 22nd. However, the USD/JPY rebounded due to expectations of easing US-China trade frictions, President Trump's denial of firing Federal Reserve Chairman Powell, and a decrease in market concerns regarding the US demand to correct yen depreciation. Subsequently, the United States reached a trade agreement with the United Kingdom on May 8 and an agreement with China on the 12th to reduce the 115% tariff rate. Market risk sentiment improved significantly, and the USD/JPY rose sharply to the late 148 yen.
In the foreign exchange options market, the yen call option spread narrowed in the one-month risk reversal of the USD/JPY, indicating a decline in demand for yen call options used to hedge against the downside risk of the USD/JPY. Among the IMM currency futures positions held by the Chicago Mercantile Exchange (CME), the long yen positions held by the non-commercial sector (the so-called speculative funds) are at an all-time high. If this portion of the positions is unwound, the market remains concerned that yen depreciation may accelerate further. Additionally, expectations for further interest rate hikes by the Bank of Japan have subsided, and the timeline for further interest rate cuts by the Federal Reserve has been postponed to between July and September. The interest rate differential between Japan and the United States supports the strengthening of the US dollar and the weakening of the yen.
The US dollar index has rebounded since hitting a three-year low of 97.921 on April 21, rising to a high of 101.977 on May 12. From the daily Ichimoku Kinko Hyo, ① the K-line fell sharply below the cloud layer, ② the turning line is roughly the same as the baseline but is generally below it, and ③ the Chikou line before the 26th is also below the K-line, forming a "typical three-fight reversal," indicating that the depreciation trend of the US dollar still exists. Since the euro accounts for 57% of the US dollar index, if the euro returns to an appreciation trend, it will suppress the upward trend of the US dollar. In determining whether USD/JPY will form a "V-shaped bottom," a graphic pattern representing a sharp drop followed by a sharp rise, it is important to focus on whether the April 2 high of 150.48 yen and the March 28 high of 151.21 yen will form the top.