USDJPY - Trades At Expensive Levels, Bullish Near Term

From a macro perspective, the EUR/USD and USD/JPY in many respects are inversely analogous in outlook. Despite the screaming bullish outside day, the higher the pair goes, the more justified it its to engage in sell-side action for an eventual turnaround in fortunes (lots of patience needed at times). Both, the risk-weighted index (in orange) and the US vs JP 5-year yield spread are in complete disconnect with the rate being paid to exchange dollars for yens.

On the daily, the bullish outside day has set in motion the potential for higher valuations near term, that’s hard to ignore, let’s just be aware that the move will be mainly fueled by technicals and potentially short-term value if divergences are found at a micro scale between the pricing of the pair and the risk profile. However, any approach towards 114.00 should see plenty of grateful sellers. On the hourly, an area to potentially engage in buy-side business would be 112.90/113.00 (POC Dec 10, retest of the previous swing high Dec 7) ahead of 112.60 and 112.25/30. These are the area where the highest concentration of liquidity on the way down is expected near term. Watch 113.50/55 as the immediate topside target (100% proj level hourly) ahead of 113.75 and 114.00.