Four charts reveal that the worst is over for the falling Japanese yen

The Japanese currency may rebound to 116 against the dollar in the coming months after falling to 125.09 on Monday, its weakest level in up to 7 years, according to a Bloomberg analysis.

The yen lost about 6% of its value during the month of March, to catch up with all of its peers from the "Group of Ten" currencies, in light of the difference in the path of the Central Bank of Japan's insistence on maintaining its accommodative monetary policy from the hawkish trend adopted by the majority of its large peers. A weak currency is an advantage for exporters even as some analysts warn that the effects of slowing economic growth may outweigh the benefits.

The Japanese yen falls to its lowest level in 5 years against the dollar

“It has been interesting selling pressure from the 125 yen level, an important support area from pre-global financial crisis peak levels, which is Also in 2015. He said that if the currency closed the week less than 122 yen; More pressure will fall on the dollar.

Speculators in Japan are betting the world is wrong about the weak yen

neck line test

The rise of the dollar against the yen pushed the currency pair to the neckline of the "inverted head and shoulders" pattern. This neckline presents quite a strong resistance level in the exchange rate zone between 124.14 and 125.86 yen to the dollar, and has the potential to push the yen up to the 116 level, which corresponds to the main level of the Fibonacci ratio.

The Demark sequential indicator - designed to determine the timing of a trend reversal - indicates that the prevailing trend of the pair is likely to break; Either through trajectory inversion, or through a brief standstill, when the thrust reaches a point of exhaustion at the threshold of 13, as it currently is. Notice how the upward trajectory of the yen exchange rate ended in late 2011, shortly after the 13 mark appeared.

meteor pattern

The yen's rebound against the dollar since it crossed the level of 125 yen this week has drawn a pattern called "shooting star" pattern, whose extended upper shadow indicates a possible exhaustion for the last rise at the top of the ascending channel.

Bottom ccles

Hearst cycles are among the popular models for analyzing price bottoms and tops. A study of price action since 2013 shows an almost 80-week cycle between lows for the currency pair. It is likely that the time for the bottom of the next cycle will come between the middle of next June and the end of it. So until this time; It is reasonable to expect continued pressure on the dollar at the 125-126 yen zone.