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USD/JPY Forecast to Drop After Break of Chart Support

USD/JPY Forecast to Drop After Break of Chart Support

2019-12-04 09:18:00
Ilya Spivak, Sr. Currency Strategist
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USD/JPY TRADING Strategy: BEARISH

  • Support break hints USD/JPY is resuming a 13-month downtrend
  • First key support eyed below 107 figure, clearing 110 invalidates
  • Broad-based trend dynamics hint at scope to challenge below 103

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USD/JPY looks to be resuming a 13-month downtrend following a corrective upswing from late-August lows. Prices recoiled from trend-defining resistance set from October 2018 to breach support defining the bounds of the three-month rise and marking the bottom of a bearish Rising Wedge chart pattern.

This suggests sellers are back in control. The next major layer of support seems to line up in the 106.78-96 area. Breaking below that on a daily closing basis sets the stage to challenge the 104.46-105.05 support shelf, a barrier in play since March 2018.

This too might give way. Setting aside the wild spike low registered in December 2018, prior trend dynamics imply scope for a move down of about 6.5 percent in the event of bearish resumption. That threatens to put prices south of the 103.00 figure in the weeks and months ahead.

US Dollar vs Japanese Yen price chart - daily

Daily USD/JPY chart created with TradingView

The underside of the Wedge pattern has been recast as resistance and now establishes the initial upside hurdle. However, reclaiming a firm foothold above the 110.00 figure – and thereby breaking the October 2018 trend line – is probably a prerequisite to truly neutralize selling pressure.

USD/JPY TRADING RESOURCES

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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