Should you buy or sell the JPY before the month’s end flows?

April will end this week, and with it, the fourth trading month of the year will be over. With no important economic releases due, this week’s focus will be on the JPY pairs for two reasons.

First, the yen was bought aggressively in March during the US banking crisis. Not all the pairs recovered from their lows, but some did. Hence, there is room for some JPY pairs to keep climbing until the end of the month.

For example, the EUR/JPY exchange rate recovered all the losses made during the banking crisis and now trades at new highs. But the USD/JPY is still below its 2023 highs, meaning that we might see some squeeze in the next few days.

Second, the trading week started with news out of Japan that the Bank of Japan’s new Governor is considering reviewing the monetary policy. On Friday, the Bank of Japan will deliver its monetary policy decision, and the JPY pairs will be in focus.

Kazuo Ueda, the new Governor, said he wants to see “quite strong” inflation before ending the yield curve control policy. Therefore, it is unlikely for the central bank to announce anything new this week, and so there is a bearish bias from a fundamental point of view on the JPY.

How about the technical picture?

USD/JPY has room for more upside this week

The USD/JPY exchange rate has been in a tight consolidation for over a week now. After bouncing from the lows at the start of the year, when it made a double bottom around 128, the currency pair jumped 1000 pips points and traded around 138 in March.

But then, the US banking crisis started. Viewed as a safe-haven currency, the JPY was bought aggressively.

USD/JPY chart by TradingView

However, somehow it carved a bottom at 130 as the crisis eased. The recent consolidation resembles a contracting triangle that should resolve with a bullish breakout.

Considering what lies ahead (i.e., the Bank of Japan meeting on Friday and the Federal Reserve’s decision next week), we shall see a breakout sooner rather than later. The bias will remain bullish as long as the pair trades above 132.