JPY Pairs May Bounce as USD/JPY Tests Key Support
The recent coordinated US-Japan yen intervention has led to a strengthening of the yen, causing Japan's stock market to fall sharply. The Nikkei 225 index fell as much as 18% from its June high before recovering from the 59,316-61,532 area.
However, despite the initial shock, charts suggest that JPY pairs may bounce back. The USD/JPY is testing the daily 200 EMA band, which also sits close to the lower edge of its rising channel. Daily stochastic RSI is flashing oversold signals, indicating a normal pause or rebound from this area.
The AUD/JPY and GBP/JPY pairs are also showing bounce signals, with both sitting at their 200 EMA supports with oversold signals. The Nikkei has reached support but the bounce is incomplete, as it remains below the 100 EMA band on the four-hour chart.
The current setup suggests a coordinated rebound in JPY pairs could help markets absorb the initial intervention shock and allow the S&P 500 to hold above its previous record. However, if the yen crosses close beneath its 200 EMA bands while the Nikkei loses its recent low, the risk would increase again.