The dollar-yen exchange rate is approaching a significant technical milestone that could confirm a major reversal in the currency pair’s long-running uptrend.
A death cross, one of the most closely watched bearish signals in technical analysis, is expected to form by the end of next week for the first time since March 2025.
The pattern occurs when the 50-day moving average crosses below the 200-day moving average, signaling that short-term momentum has shifted decisively against the prevailing trend.
The dollar-yen pair had been in an uptrend for 17 months before recent price action began raising red flags for technical analysts monitoring the exchange rate.
On Friday, the dollar fell 1% against the yen in afternoon trading, compounding concerns that the currency pair has lost its footing at a critical chart level.
The decline followed a failed attempt by the dollar-yen rate to reclaim its 200-day moving average, a threshold widely regarded as the dividing line between long-term uptrends and downtrends.
Ari Wald, head of technical analysis at Oppenheimer and Co., warned that “today’s failure at the 200-day moving average puts the pair at risk of testing support at 152, which is near the 2026 low.”
Wald also offered broader context on how death crosses should be interpreted, noting that “we like to say that every major downside move starts with a death cross, but not every death cross leads to a major decline.”
The historical record for this particular currency pair is mixed, with the last death cross on March 25, 2025, preceding an additional 6% decline before the rate bottomed roughly a month later.
The death cross before that, occurring on September 9, 2024, produced only a further 1.8% drop, with the bottom arriving within a week of the signal forming.
Treasury Secretary Scott Bessent amplified the market move when he posted on X about President Trump’s endorsement of the “desirability of a strong yen,” a position the Bank of Japan has been actively advocating.
Bessent previously declared to financial markets that “I am the house now,” a statement reflecting the administration’s confidence in its ability to influence market outcomes.
History, however, offers cautionary examples of government attempts to redirect powerful market forces, including the collapse of the British pound in 1992 and the Asian financial crisis of the late 1990s.
When authorities signal to investors that they should stop buying a particular asset, there can be an almost defiant interest in doing precisely the opposite, as Bessent’s prior efforts to slow the rise in longer-term Treasury yields demonstrated.
A sustained decline in the dollar-yen rate would align neatly with both the Trump administration’s trade objectives and the Bank of Japan’s longstanding preference for a stronger domestic currency.
