Is Japanese Yen Weakness Coming To An End? (Elliott Wave Analysis)

The weakness of Japanese Yen may be coming to an end, as we see it nearing key Fibonacci price support… and when the Federal Reserve (FED) is on hold and BoJ says its watching the FX rates. 

USDJPY has seen a strong reversal last year after failing to break above 150 which appears to be an important and strong resistance. Not only technical, but there were plenty of other factors that are causing a sharp turn on the pair going into the year end. Firstly, there was BoJ interventions back in September and October of 2022 and then we also had US inflation that started to come down, so lower US yields helped JPY to gain as dollar hits resistance against most of its rivals.

Despite all of these moves, USDJPY is climbing higher now and even accelerated after new BoJ governor did not change its policy. But we have to keep in mind that the Federal Reserve (FED) has now finally decided to put rates on a pause so this can be another potential resistance for the USD in upcoming months, especially if we consider that BoJ also noted that they are watching the FX rates very closely. Surely, they do not want JPY to weaken too much. We are seeing some new lows vs other currencies. So, my assumptions are that a FED pause on interest rates, and BoJ comments and possible new policy decisions may cause a new turning point for the USDJPY.

Looking at the Elliott wave chart we see JPY weak on futures market with currency trading in late stages of a larger A-B-C corrective decline that can stop at the 61,8% – 78,6% Fibonacci support area.

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elliott wave analysis japanese yen currency near major low bottom

One of the reason for weak Japanese Yen is also current risk-on sentiment. But, considering that NIKKEI 225 is already at the all-time highs, with a move out of a triangle, we should be aware of a limited upside, since we know that trust out of a triangle are final in a sequence. So, not only BoJ and FED, but also rehearsal down on Nikkei225 can be supportive for the Yen and can cause strong resistance for the USDJPY pair soon.

elliott wave analysis japanese yen versus nikkei 225

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The author may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.