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USD/JPY Triangle, EUR/JPY Inverse H&S Point to Weaker Yen Soon

USD/JPY Triangle, EUR/JPY Inverse H&S Point to Weaker Yen Soon

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- USDJPY triangulating between 103.60 and 104.45.

- EURJPY inverse H&S points to 140 and higher.

- US Dollar strength in August shouldn't surprise - it's a seasonally strong month.

The US Dollar looks like it's in good condition even if it experiencing a small pullback, and the Euro could run higher as a result. Yet both EURJPY and USDJPY look like they want higher. In context of some recent economic data, the Euro and the US Dollar have some positives in their respective corners.

Today's Euro-Zone Core CPI (AUG) came in above expectations at +0.9% y/y, likely further diminishing the faint chance of extraordinary action at next week's European Central Bank policy meeting. With 138.8K net-short contracts held by non-commercial/speculators, a lack of non-standard easing measures could prompt a short covering rally in the EUR-complex.

While the Euro's misfortunes still loom large, short-term psychology may come into play over the coming days. Conversely, the US Dollar is seeing long-term sentiment start to build as economic data has improved considerably over the past few weeks. The Citi Economic Surprise Index has increased to +32.9 today from -26.0 on July 24. See the DailyFX US Dollar Economic Calendar for the data (six noteworthy items) due today.

These influences are independent of one another, and they each may prove positive for the Euro and the US Dollar in the short-term. Even if EURUSD's immediate direction is unclear as it carves out a range, there are more readily identifiable opportunities in EURJPY and USDJPY.

See the above video for technical considerations in EURUSD (bear flag or triangle), EURJPY (inverse H&S), and USDJPY (triangle).

Read more: EUR/USD Attempting to Break Downtrend from Mid-August - Key Levels

--- Written by Christopher Vecchio, Currency Strategist

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