USD/JPY

This time is different… Is it really different? The price action on USD/JPY will help us answer this question. A lot has been said and done for Japan, for its economy and for its currency over the past decade. 5 years trend has been downwards on USD/JPY declining from 125 levels to 75 levels. Deflation, earthquake, tsunami, quantitative easing and government intervention… All sorts of news effect and outside force has shaped the up and down swings on USD/JPY.

This is one of the most exciting charts and should be watched closely in 2012. 80 levels has been a critical support for the cross rate and lately we are seeing USD/JPY pushing above 80 levels, possibly reversing the false breakdown below 80.

In the past 5 years every counter trend rally found resistance at the 200 day moving average. Though there were few violations, none of them held above the long-term average more than two months. During the same time RSI had a clear downtrend.

Recently we are seeing USD/JPY rally towards the 5 year-long trend resistance and also breach above its long-term moving average at 78 levels. RSI is also breaking the 5 year-long downtrend. All bullish signals for the USD and bearish for JPY.

Is it really different this time? Will USD/JPY reverse its 5 year-long downtrend and rally towards 100 levels?  USD/JPY should be on our watch list in the next few months.