USD/JPY Technical Analysis: Breakdown Coming

Investors monitoring the U.S. Dollar/Japanese Yen (USD/JPY) should be aware of potential warning signs based on technical analysis. The currency pair has been trending within an upward-sloping parallel channel since late 2022. Statistical tendencies show these ascending channels break to the downside in about 80% of cases.

A key development pattern to watch within these channels is the interaction with the lower trendline. Specifically, a third touch of this support level often precedes a breakdown. While a small, temporary bounce might occur after this third touch, the subsequent test or move lower frequently results in a decisive break below the channel.

The current USD/JPY chart indicates the price is now making its third contact with the lower parallel trendline. This suggests a potential near-term bounce, possibly retracing towards the 150 area. Following this potential bounce, the technical pattern points towards a higher probability of a breakdown below the channel, signaling a potentially sharp appreciation of the Japanese Yen against the U.S. Dollar.

Note the chart above.