USD/JPY Death Cross Looms as Traders Eye Potential Decline

The USD/JPY currency pair is facing a potential bearish signal as it approaches a 'death cross'.

A death cross occurs when the 55-day moving average falls below the 200-day moving average, which could prompt traders to bet on a decline in the dollar's value against the yen.

This would be a trade against the recent trend, as the dollar has been rising strongly following a US interest-rate hike on September 16.

However, there are reasons beyond technicals why this bearish signal could prove popular. Expectations for further US rate hikes have diminished slightly due to softer-than-expected inflation data and a drop in oil prices.

The Bank of Japan's decision to raise rates or increase the pace of its monetary policy could also impact USD/JPY, as surprisingly strong Japanese inflation data has raised the probability of such an action.