Is the Yen rally over?

The truth is that I don't know if it's over or not. It certainly feels like the USDJPY pair is going a lot lower, given that the Fed is very close to pausing and cutting rates in 2023. Deflation has always benefited the Yen, which might be the case again. The BoJ took the best stance of all central banks, as they held rates low and provided liquidity when the global economy was slowing down and would very clearly go into a deep recession in 2023-2024. Eventually, rates elsewhere will go down, but rates in Japan will be pretty much the same (go down a lot less). Therefore, the JPY could outperform everyone else.

However, there is a chance that USDJPY is about to bottom. It's very close to testing a key area; I think it will sweep the double bottom and bottom at the S3 monthly pivot. If there is going to be a bottom soon, that's where I expect it to be. If the USD is to bounce quickly, that's where I expect it. It feels too early for the dollar to collapse outright, and maybe we will get a mini inflation scare before we move properly into deflation.

So this is my bullish scenario. Fall slightly below 130 and then slowly go back up. 135.8 is the first target, and if 138 is reclaimed, the next target is 145.

Comment:

USDJPY first went up, got rejected at resistance, and has now hit my target. Based on this price action, it's unclear whether USDJPY can go up, as it looks more likely to collapse. It's now or never for the USD. This is the best place/time to go long USDJPY, even though the probabilities aren't stacked with this trade as it is going against the trend.

Comment:

The fact that this drop has happened on the yearly open boosts the probability of this trade playing out.