USD/JPY signals are bearish across both trend and momentum indicators - Scotiabank

Eric Theoret, analyst at Scotiabank noted that yield spreads are supportive for USD/JPY while technical indicators point to a bearish continuation.

Key Quotes

“Yield spreads are supportive for USD/JPY, however measures of sentiment are providing an important offset with a gradual rise in measures of implied volatility. Risk reversals have responded accordingly and are pricing a greater premium for protection against downside risk in USD/JPY (JPY strength).”

“USDJPY short-term technicals: bearish—signals are bearish across both trend and momentum indicators, the ADX providing confirmation with a rise above 25. Moving averages are bearishly aligned across a range of time horizons.”

“USDJPY appears to have formed a symmetrical triangle over the past week, the pattern typically resolved via continuation (in this case to the downside).”