JPY: Three technical reasons to buy the yen in March

The decline of the Japanese yen could be seen as the USD/JPY chart shows three reversal patterns: a bearish divergence of the RSI, a triangle as a reversal pattern and an ascending wedge.

The USD/JPY was a currency pair that rallied during the pandemic. It continued to advance for over a year until it encountered strong resistance in the 116 area.

One reason to keep an eye on the Japanese yen is its safe haven status. In times of uncertainty, it tends to appreciate as Japanese investors repatriate funds held abroad.

As such, the war in Ukraine provides a fundamental reason to own the Japanese yen in March. And the technicals? Here are three: a bearish RSI divergence, a triangle as a reversal pattern and an ascending wedge.

Bearish RSI Divergence

RSI (Relative Strength Index) is one of the most popular oscillators used in technical analysis studies. When it reaches levels above 80, it indicates an overbought market.

Furthermore, if it does not make new higher highs, while the actual market does, the RSI shows a bearish divergence. In other words, staying long, or invested, is risky.

Triangle as a Reversal Pattern

Shown in blue on the chart above, a triangle has formed at the very top. Coupled with the bearish divergence of the RSI, the triangle is susceptible to reversal.

According to Elliott Wave Theory, a triangle as a reversal pattern appears either at the end of complex corrections or at the end of a terminal impulse wave. Both are bearish in this context.

Rising wedge

Finally, an ascending wedge shown in black on the chart above is another reason for bulls to be concerned about USD/JPY. Rising wedges are reversal patterns that appear at the top of bullish trends.

The focus is now shifting to the lower edge of the pattern. A breakout and hold below could signal the end of the USD/JPY uptrend that has lasted over a year.

In summary, the war in Eastern Europe provides fundamental arguments to buy the yen. Coupled with the technicals, the USD/JPY bears have a compelling trade in March.