Baxia Markets
February 29, 2024

Navigating USDJPY's Bearish Trend: Key Takeaways from Recent Price Action and News Events

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The USDJPY currency pair faced considerable turbulence following yesterday's US GDP news release, which fell short of expectations at 3.2% versus the forecasted 3.3%. This disappointment triggered a notable downturn in USDJPY, resulting in a breach of its ascending trendline support. The market's attempt to test resistance around 150 yen led to the formation of an evening star candlestick pattern, followed by consecutive bearish Marubozu candlesticks, signaling a swift bearish reversal.

Navigating USDJPY's Bearish Trend: Key Takeaways from Recent Price Action and News Events

As traders brace for today's economic events, core PCE and US initial jobless claims take center stage. Forecasts anticipate a dip in core PCE to 2.8% from the previous 2.9%, suggesting a potential slowdown in inflation and weakening the USD. Similarly, expectations for higher initial jobless claims could further weigh on the greenback, should the data exceed forecasts.


In the realm of technical analysis, indicators add to the bearish outlook for USDJPY. EMA 50 and 200 are inching closer to forming a death cross, a widely recognized signal of a strong bearish reversal. The downward trajectory of both EMAs underscores substantial bearish pressure on the currency pair. Additionally, the volume profile indicator reveals significant bearish sentiment as USDJPY trades well below the value area, indicating a strong preference for selling pressure.


Expanding Bollinger Bands further highlight the robust bearish momentum, with prices positioned at the lower band. The widening gap suggests continued downward pressure on USDJPY. Moreover, oscillator indicators confirm the prevailing bearish trend, with MACD signaling below the zero line and RSI below the 30% level, despite the current rebound in prices.


In summary, USDJPY remains firmly bearish, with limited upside potential. Today's economic releases could exacerbate the downward pressure, particularly if they fall below expectations. Traders should remain vigilant for further bearish signals amidst the challenging market environment.


Key Takeaways:

  1. US GDP Impact: Yesterday's lower-than-expected US GDP release led to a sharp decline in USDJPY. The currency pair broke below its ascending trendline support, triggered by an evening star candlestick pattern formation and consecutive bearish Marubozu candlesticks.
  2. Upcoming Economic News: Today, focus shifts to core PCE and US initial jobless claims. Forecasts indicate a slowdown in inflation with lower PCE data and higher initial jobless claims, potentially weakening the USD further.
  3. EMA Signals: EMA 50 and 200 are nearing a death cross, signaling a strong bearish reversal. Both EMAs pointing downward indicate significant bearish pressure on USDJPY.
  4. Volume Profile and Bollinger Bands: USDJPY trades significantly below the value area, indicating strong bearish sentiment. Bollinger Bands show expanding width, with prices at the lower band, suggesting robust bearish momentum.
  5. Oscillator Indicators: MACD and RSI confirm the bearish trend. MACD signals below the zero line, and RSI below 30% further support the bearish sentiment, despite the current rebound.


Key Economic Releases to Watch Today

EUR, German CPI (YoY) 

Forecast 2.6% vs Previous 2.9%

US, Core PCE Price Index 

Forecast 2.8% vs Previous 2.9%

US, Initial Jobless Claims

Forecast 209K vs Previous 201K


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