USD/JPY continues its advance in the American session, reaching 128.74, the highest level since April 2002. It is currently consolidating a few pips below this level.
The US dollar remains the strongest currency as it has been the safe haven asset in recent months. It is also receiving support in the expectation of more aggressive rate hikes by the Federal Reserve.
On January 19, 2022, the Japanese yen started an Elliott wave sequence. It is likely that it has currently developed the fifth wave. In case the yen makes a correction below 1.2812, the last wave could be confirmed and 3 corrective waves could occur (a, b, c). It is likely that there will be a technical correction in the next few days because the currency pair is very overbought according to the eagle indicator.
According to the daily chart, USD/JPY is showing signs of being extremely overbought as it is located in the zone +1/8 Murray. Besides, the eagle indicator is touching the level 95-point which represents an imminent technical correction.
This Japanese yen's weakness has pushed the limits of price action so that we could expect a clear correction in the coming days as long as it consolidates below 128.12.
In Japan, investors are concerned as many companies and banks are warning about the rapid depreciation of the yen against the dollar. For now, the comments have not had any impact on the correction of the Yen.
The Bank of Japan's Governor said that the recent movements of the yen have been too fast and that this can create problems for companies. In case the Japanese government intervenes to stop the depreciation of the yen, we could see a sharp drop in the USD/JPY pair in the coming days and it could reach SMA 21 located at 123.80.
Our trading plan is to sell while USD/JPY trades below the current high of 128.70 with targets at 128.12, 126.73 and up to 8/8 Murray at 125.00.
