Yen Poised for Big Rally Amid Ongoing Slide

The Japanese yen has been experiencing a decline in value against the US dollar this year, despite efforts by officials to halt its slide. However, historical patterns suggest that the currency may be due for a significant strengthening move.

Technical analysts use past price movements as a tool to predict future prices. In previous cases dating back to 2022, Japanese interventions have triggered a quick jump in the yen's value against the dollar, followed by a slow drift back toward weakness. However, eventually, a much larger yen rally has followed.

The current price of the yen per dollar is struggling near 159.60, which is the midpoint of the latest intervention-driven slide from July's high of 163.99 to a low of 155.20. This midpoint is often closely watched by traders as a stopping point for market prices. Hesitation before reaching a big round number such as 160 is also significant.

If the dollar slips below support at 158, it could open the way toward 155, then this year's low of 152.10, and possibly even toward 149, a spot where a price gap was left on the chart back in October. Some traders expect this gap to eventually get filled.

Surprise US Treasury bond buyback plans, which have weakened the dollar broadly, could help push things in that direction. On the other hand, if the dollar climbs back above 159.60 and then 160, it would suggest yen weakness toward 164, particularly if persistently high oil prices continue to hurt the yen.