USD/JPY: Dollar Breaks Through Key Double Bottom as Traders Ramp Up Short Bets

Price action in the volatile dollar-yen pair rekindled enthusiasm for technical analysis with a looming battle at a long-term support zone.

• The USDJPY pair touched a fresh 2024 low and bounced right back up as traders reacted to something seen only on the chart. A double bottom pattern, where the price falls to a low that has previously acted as support, emerged on the daily time frame. The dollar-yen slipped on Monday to ¥140.20 — a level last used as support on December 28 — and broke slightly below it. What matters now is who will have the upper hand — the bears or the bulls?
• A Friday dip wrapped up the second straight losing week for the exchange rate, which has been swayed by fresh remarks from Bank of Japan officials, on the one hand. The Japanese central bank looks excited to continue raising interest rates, making the yen more appealing. On the other hand, prospects of lower interest rates in the US are chipping away at the greenback’s valuation. The result? Stars have aligned for the bears.
• The Federal Reserve is getting ready to cut interest rates this week for the first time in about four years. Presently, the benchmark rate in the US is sitting at 5.5% but expectations point to a cut in the ballpark of 25 basis points to 50 basis points. Prepare your trades for sweeping volatility in the lead-up to Wednesday when the Fed will announce its rate cut.