#JPY upside potentialHi, dear traders and colleagues,
Let's take a look at the JPY basket and analyze its potential implications in relation to other currencies.
The Japanese Yen (JPY) has been weakening for a considerable period due to the policies implemented by the Bank of Japan (BOJ). However, given that we are now at the end of the hiking cycle in other central banks, it is reasonable to assume that the interest rate differential between JPY and other currencies will start to decrease. This shift could potentially lead to the JPY gaining strength.
To support this hypothesis, we can examine the chart, where the price recently broke above a long-standing bearish channel with an impulsive move. This breakout suggests that there might be further bullish momentum in store.
Another noteworthy factor that adds confidence to the authenticity of this upside breakout, unlike the previous false breakout marked within the box, is the current price action. During the previous false breakout, the price formed a V-top chart pattern, resulting in a bullish impulsive move followed by a bearish impulsive move. This indicated that the breakout was driven by news events and was not sustainable. However, in the current scenario, we see the price consolidating after the upside breakout and not immediately retracing back into the channel range. This gives us reason to believe that this breakout is more likely to be genuine and mature over time.
Now, in terms of trading, an upside move in the JPY basket implies that currencies paired against the JPY are likely to face challenges and experience downside movements. This includes currency pairs like EURJPY, GBPJPY, CHFJPY, and so on.
To identify potential entry points, we are currently monitoring two key areas. The first area of interest is marked by the arrow line, which points to yesterday's low. We are keen to observe how the price reacts around this level. The second area to watch is the 4-hour timeframe supply area, which coincides with the upper line of our bearish channel. This area could serve as a potential retest point for the price.
Keep a close eye on these areas for potential trading opportunities, and remember to adapt your strategy as the market evolves.
Happy trading!
