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JPY: Weaker JPY Persists, and Overbought RSIs Provide No Reversal Signal

JPY
  • The weaker JPY is helping push USD/JPY close to new daily highs ahead of the US crossover, however the pair is yet to test resistance at 161.69 ahead of the cycle high at 161.95. Despite this, the JPY spot trade-weighted index has pressed to a new multi-decade and cycle low thanks to cross-selling of JPY, particularly against the EUR and GBP. 
  • Both crosses are technically overbought on the 14-day RSI - with overbought conditions hitting the highest level since mid-2023 against GBP, and the highest since late April against the EUR - just before Japanese intervention on April 29th.
  • While an overbought RSI can argue for an imminent move lower, price patterns this year suggest corrective phases after this technical signal are extremely short-lived. A basic RSI trading strategy (short when RSI moves below 70 from above) in EUR/JPY and GBP/JPY would have lost 7.1% and 8.4% so far in 2024.
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  • The weaker JPY is helping push USD/JPY close to new daily highs ahead of the US crossover, however the pair is yet to test resistance at 161.69 ahead of the cycle high at 161.95. Despite this, the JPY spot trade-weighted index has pressed to a new multi-decade and cycle low thanks to cross-selling of JPY, particularly against the EUR and GBP. 
  • Both crosses are technically overbought on the 14-day RSI - with overbought conditions hitting the highest level since mid-2023 against GBP, and the highest since late April against the EUR - just before Japanese intervention on April 29th.
  • While an overbought RSI can argue for an imminent move lower, price patterns this year suggest corrective phases after this technical signal are extremely short-lived. A basic RSI trading strategy (short when RSI moves below 70 from above) in EUR/JPY and GBP/JPY would have lost 7.1% and 8.4% so far in 2024.