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Following its worst session in 20 weeks yesterday, volatility on USD/JPY has not gone unnoticed. After crashing down to the March trendline, the cross is clearly sensitive to the rout in bonds and headlines surrounding trade. Yet, whilst this could allow for some whipsaws over the coming session/s, we’re keeping a close eye on developing triangle formations which could result in explosive breakouts on the daily or weekly chart.

Given the weekly triangle has been developing since 2015, and the daily triangle sits nicely near its upper boundary, the bias is for a downside break of the March trendline. In doing so this also allows the weekly chart to coil tighter and provide another sizable leg. But, much further out, its worth keeping an eye on the weekly triangle as a breakout from it could see levels of volatility not seen since the impulsive legs throughout 2012 and 2014.

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Matthew Simpson CFTe,Senior Market Analyst (Asia)