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A threatening chart formation is developing in the dollar yen exchange rate, signaling that momentum may have shifted toward the Japanese yen. The looming “death cross” could confirm that the rapid rise in the currency pair has reversed.

That prospect would suit President Trump, whose administration viewed the dollar’s strength against the yen as unwelcome. Treasury Secretary Scott Bessent also recently declared to financial markets, “I am the house now.”

Death crosses are not guaranteed market timing signals. Still, technicians use them as evidence that an emerging decline may be turning into a durable downward trend rather than another temporary pullback.

“We like to say that every major downside move starts with a death cross, but not every death cross leads to a major decline,” Ari Wald, head of technical analysis at Oppenheimer & Co., wrote in emailed comments to MarketWatch.

The dollar yen rate dropped 1% in Friday afternoon trading, putting it on course for its biggest one day decline in three weeks. Bessent also posted on X about Trump’s endorsement of the “desirability of a strong yen,” a goal backed by the Bank of Japan.

The market move arrived at a technically significant moment. It offered additional evidence that the currency pair’s 17 month uptrend may have broken, because a stronger yen causes the dollar yen rate to decline.

Government requests for investors to stop buying an asset can sometimes invite defiance, particularly when traders believe officials fear that a rally will continue without direct intervention. History includes dramatic failures by governments seeking to halt market moves.

The source cited the British pound’s collapse in 1992, the Asian financial crisis during the late 1990s, and Bessent’s recent efforts to restrain rising longer term Treasury yields. Those examples encouraged skepticism about another official push in currency markets.

The U.S. Treasury collaborated with the Bank of Japan in late July to stop the dollar yen exchange rate from continuing its climb. Many market participants believed any initial decline would fade and that the forces behind the rally would eventually reassert themselves.

Following a brief period of strength, the currency pair fell below a trend line on Sept. 3. That line had tracked the rally from the April 2025 lows, making the break an important test of the previous advance.

Buyers then returned and pushed the rate back toward the trend line to determine whether the break would hold. Friday’s selloff confirmed that the line had indeed been broken, adding weight to the case for a reversal.

The decline also followed an unsuccessful attempt to climb above the 200 day moving average. Many chart watchers treat that average as a dividing line separating longer term upward trends from downward trends.

“Today's failure at the 200-day moving average leaves the [currency] pair vulnerable to a test of 152 support, near the 2026 lows,” Wald wrote. That assessment points to another possible technical target if selling continues.

A death cross occurs when the 50 day moving average, commonly used to track shorter term trends, falls below the 200 day moving average. Based on their current paths, the crossover is expected before the end of next week.

That would be the currency pair’s first death cross since March 25, 2025. Following that signal, prices declined another 6% before reaching a bottom roughly one month later.

The prior death cross appeared on Sept. 9, 2024, but the outcome was far less dramatic. Prices bottomed only one week later after falling another 1.8%, demonstrating why the pattern cannot guarantee an extended decline.

Even so, Wald believes the current setup carries more weight because the prospective signal “aligns with a broad loss of momentum.” He added that it “strengthens the case for a trend reversal,” just as Trump’s preference for a stronger yen gains visible market support.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.