Talking Points

USD/JPY Daily

USD/JPY Daily Chart

Technical Outlook:USDJPY gaped into the Sunday open with the subsequent rally attempting to breach above Trendline resistance extending off the yearly highs. Note that each time we’ve approached this slope price has either accelerated through OR encountered strong resistance. This low-tolerance threshold remains the focus heading into the start of the week (look for a daily close above) with the near-term focus higher while above the highlighted region just around the 200-DMA.

USD/JPY 240min

USD/JPY 120min Chart

Notes: A closer look at price action highlights a newly identified slope off the lows with the median-line converging on the monthly open at 110.76 (near-term support). A breach of the highs targets the 38.2% retracement / monthly opening range high at 115.59/71 backed by more significant resistance at 112.20/25.

A break below the 110.50 invalidates the long-bias with such a scenario targeting 110.11 backed by the lower parallel at 106.60/80. From a trading standpoint, the immediate risk is for a pullback off these levels but I’ll favor fading weakness while above the monthly open. Look for a shift in sentiment to accompany the move as broader metrics still remain rather bearish.

USDJPY Moment of Truth: Rally Attempts Breach of Key Slope Resistance
  • A summary of IG Client Sentimentshows traders are net-long USD/JPY- the ratio stands at +2.03 (67.0% of traders are long)- bearish reading
  • Traders have been net-long since May 17; price has moved 1.8% lower since then
  • Long positions are 11.6% higher than yesterday and 5.8% higher from last week
  • Short positions are 5.9% higher than yesterday but 13.2% lower from last week
  • Although broader sentiment continues point lower, the recent rally in price is attempting to breach multi-month slope resistance, and if broken, would shift the technical focus to the long-side of the pair. That said, look for a continued pullback in sentiment off the monthly extremes to further validate the breakout play.

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Relevant Data Releases

USDJPY Moment of Truth: Rally Attempts Breach of Key Slope Resistance

Other Setups in Play:

- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex contact him at mboutros@dailyfx.com or Click Here to be added to his email distribution list.