29.11.202111:17 Forex Analysis & Reviews: USD/JPY analysis and outlook for November 29, 2021

Today we are going to focus on the USD/JPY pair. It has its own unique characteristics because both currencies are, depending on the situation and the mood of market participants, safe-haven assets. The demand for safe-haven currencies is growing. The COVID-19 pandemic and its negative impact on both the world economy and individual countries' economies is the main reason for investors' aversion to the risk. The coronavirus pandemic has lasted about two years, during which time investors have most often favoured the US dollar as a safe-haven asset. However, the situation is constantly changing in the market. A new strain has recently been discovered and is already spreading around the world.

Thirteen cases of the new Omicron coronavirus variant have been found among passengers who were on flights from South Africa that arrived in Amsterdam. Although the new South African strain of coronavirus is considered to be extremely dangerous, capable of multiple mutations, and causing concern even for WHO experts, virologists from South Africa emphasize the weak symptoms of the new strain and urge their colleagues not to panic. Until recently, the US dollar would have been favoured by market participants as a safe haven, but that is not yet the case. Why? I believe that the technical picture of USD/JPY, which we start analyzing from the weekly chart, is the reason.

Weekly

Trying to continue their bullish trend, the upside players, as expected, encountered very strong seller resistance in the significant and important price range of 115.00-115.50. The start of trading on November 22-26 was entirely bullish for USD/JPY. The pair strongly rose, breaking through resistance at 114.72 and also the historical, technical and psychological mark at 115.00. However, after it reached the level of 115.54, the market sentiment changed sharply. The bulls encountered very strong resistance from the sellers, who did not fail to take advantage of this to take control of the further course of trading. As a result, a candlestick with a bearish body and an extremely long upper shadow appeared on the weekly USD/JPY chart. Taking into account this factor, as well as the false-break of the levels 114.72, 115.00 and 115.50, the last weekly candlestick, with a high probability, may be considered as a reversal. Moreover, it appeared at the end of the upward movement when it tried to pass the mark at 115.00, and its closing price was 113.35. Notably, the pair was prevented from further declines last week by the red Tenkan line of the Ichimoku indicator. In the opening trades of the current five-day period, the pair already fell under the Tenkan, but so far it got back above this important line, which represents support for the pair on the weekly chart. Nevertheless, considering the last candlestick in this timeframe, I think it is more likely that the pair will swing southwards or it will make a deep corrective pullback.

Daily

Looking at the daily chart of the USD/JPY, it can be seen that Friday's collapse was not an accident. As a result of its fall on November 26, the pair confidently broke through the red Tenkan line and blue Kijun line of the Ichimoku indicator. The bulls' hope for the instrument was the 50 simple moving average, which stopped the collapse of the quote and at the time of writing continues to provide USD/JPY support. The uptrend has run out of steam and we are now likely to see a trend reversal. Therefore, it would be reasonable to sell the pair after slight corrective pullbacks to the levels 114.00, 114.15 and 114.55. If there are any significant technical changes, the USD/JPY outlook will be adjusted.