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USD/JPY Price Outlook: Yen Decision Time as Rally Tests Yearly Highs

USD/JPY Price Outlook: Yen Decision Time as Rally Tests Yearly Highs

Michael Boutros, Strategist

The Japanese Yen has continued to trade within the confines of an ascending pitchfork formation extending off the yearly lows with price now approaching resistance just ahead of the median-line / yearly highs. Here are the updated targets and invalidation levels that matter on the USD/JPY charts heading into the start close of September trade. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

USD/JPY Daily Price Chart

USD/JPY Price Chart - Daily

Technical Outlook: In my most recent Weekly Perspective on the USD/JPY, we highlighted a key resistance zone at 112.65-113.27– a region, “defined by the 2018 open, the 200-week moving average and the 61.8% retracement of the 2017 decline. Note that this zone stands just pips from the objective yearly opening-range highs at 113.38.” Price is trading in this region today ahead of the monthly close.

The immediate focus is on key daily resistance at 113.08/27 where the yearly high-day close converges on the 61.8% retracement- a breach / close above this threshold is needed to keep the long-bias in play targeting the November high-day close at 113.70. Daily support now rests at 112.65 and weakness below this level would risk a larger correction in price.

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USD/JPY 240min Price Chart

USD/JPY Price Chart - 240min

Notes: A closer look at price action shows USD/JPY trading within a near-term channel formation extending off the monthly lows, further highlighting support at 112.65. Near-term bullish invalidation stands with the weekly open / opening-range lows at 112.40/43. A break below this level would risk a larger correction with such a scenario targeting 112.15 backed by 111.75 and 111.43 – both levels of interest for possible exhaustion / long-entries IF reached. A topside breach of this resistance zone targets the median-line backed by the November high-day close / 1.618% extension at 113.70.

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Bottom line: The immediate focus is on a reaction off at this key resistance zone with the long-bias at risk while below the median-line. From a trading standpoint, this is a good place to book profits / raise stops and I’m looking for signs of exhaustion / short-entries in this zone. With that said, keep in mind that we are heading into the end of the month / quarter tomorrow and we’ll want to tread lightly here.

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

USD/JPY Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-short USD/JPY - the ratio stands at -1.4 (41.7% of traders are long) – weak bullishreading
  • Traders have remained net-short since September 13th; price has moved 0.7% higher since then.
  • Long positions are1.7% lower than yesterday and 47.4% higher from last week
  • Short positions are 8.2% higher than yesterday and 46.5% higher 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. However traders are more net-short than yesterday but less net-short from last week and the combination of current sentiment and recent changes gives us a further mixed USD/JPY 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

USD/JPY Economic Calendar

Economic Calendar - latest economic developments and upcoming event risk. Learn more about how we Trade the News in our Free Guide!

Active Trade Setups

- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com

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

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