- USDJPY up more than 8% off yearly lows- Looking for an exhaustion high sub-113.27
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The Japanese Yen has remained on the defensive since the start of the month with USD/JPY trading just pips shy of the yearly highs. Here are the updated targets and invalidation levels that matter for USD/JPY heading into the close of the week. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
USD/JPY Daily Price Chart
Technical Outlook: In my latest Weekly Technical Perspective on the Japanese Yen, we highlighted that price had broken above a critical resistance zone at, “110.88-111.65- a region defined by the 61.8% retracement of the November sell-off and the 50% of the broader decline off the late-2016 high.” Price closed above this threshold last week and leaves the risk for a late-month high in USD/JPY.”
Prices has rallied through yearly open resistance at 112.65 with the advance now trading just below our next key resistance target at 113.27. This level is defined by the 61.8% retracement of the late-2016 decline, the 200-week moving average and pitchfork resistance.
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USD/JPY 240min Price Chart
Notes: A closer look at price action sees USD/JPY trading within the confines of an embedded ascending pitchfork formation with the 61.8% line catching the highs over the past two weeks. The broader focus remains constructive while above 111.62 (bullish invalidation) but the advance is vulnerable near-term while below this confluence resistance level. Interim support rests along the median-line (~112.40s) backed by 112.16 and the lower parallel- both areas of interest for possible exhaustion / long-entries IF reached. A topside breach above 113.27 targets subsequent resistance objectives at 113.70/89.
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Bottom line: USD/JPY is testing up-trend resistance and puts the broader long-bias at risk near-term while below 113.27. From a trading standpoint, look to reducing long-exposure at these levels and be on the lookout for a near-term exhaustion high in price while below resistance for short-entries.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
USD/JPY Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-short USD/JPY- the ratio stands at +1.44 (41.0% of traders are long) – weak bearishreading
- Traders have remained net-short since June 28th; price has moved 2.5% higher since then
- Long positions are 3.7% lower than yesterday and 3.5% lower from last week
- Short positions are 1.9% lower than yesterday and 1.5% lower from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger USD/JPY-bullish contrarian trading bias from a sentiment standpoint.
See how shifts in USD/JPY retail positioning are impacting trend- Learn more about sentiment!
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Relevant USD/JPY Economic Data Releases
Economic Calendar - latest economic developments and upcoming event risk
Other Setups in Play
- Crude Oil Technical Outlook: Prices Plummet towards Initial Support
- US Dollar Trade Levels– Majors Carve Clear Monthly Opening-ranges
- GBP/USD Technical Outlook: Sterling, Down but Not Out
- XAU/USD Technical Outlook: Moment of Truth for Gold Prices
- Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com
