USD/JPY is poised for a move higher as it completes a falling wedge pattern

on Mar 31, 2023
  • USD/JPY completes a falling wedge pattern
  • A bullish divergence with the RSI supports more upside
  • 138 is back in the cards

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The banking crisis in the United States and the Credit Suisse takeover by UBS have greatly damaged the JPY pairs. USD/JPY, in particular, was extremely weak, trading below 130 once again after reaching 138 during March.

When financial turmoil hits markets, traders look for safe haven assets. In the currency market, the yen acts like such an asset, and so the JPY pairs were the ones that experienced the highest volatility.

But what appeared like doomsday for some surely appeared like an opportunity for others. As it turned out, the USD/JPY bounced after forming a falling wedge pattern and now threatens to retrace the bearish move fully.  

Bullish divergence with the RSI suggests more upside

A falling wedge pattern reveals a series of lower lows and lower highs, but the price action stalls at the end of it. A breakout above the upper edge of the pattern is needed for the pattern to be considered complete.

That breakout appeared with the move above 132.

On top of that, a bullish divergence with the RSI supports the upside. While the market formed a new lower low, the RSI did not confirm it. Whenever that happens, the bias turns bullish.

What is the upside target?

The market often fully retraces the falling wedge pattern. As such, one should not be surprised to see the USD/JPY pair trading back above 138 sooner rather than later.


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