GBP/JPY, AUD/JPY, EUR/JPY, Japanese Yen Technical Analysis – Talking Points:
- The Japanese Yen seems poised for further downside as it approaches a key inflection point against its major G10 counterparts
- AUD/JPY and EUR/JPY bullish price action could drive the risk-sensitive exchange rates higher
- GBP/JPY may turn lower as a bearish Shooting Star candle at resistance could stoke further selling
Japanese Yen Index** Daily Chart – JPY Seemingly Capped By 3-month Downtrend
JPY index created using TradingView
** JPY index averages USD/JPY, AUD/JPY, EUR/JPY and GBP/JPY
Waning market sentiment was a primary driver of the haven-associated Japanese Yen’s surge in June, climbing back from post-crisis lows to test the downtrend that has encapsulated price action since the highs of March.
Both the RSI and Momentum indicators seem to suggest a more sustained pull-back as price rests precariously atop its 200-day moving average.
Sellers may be encouraged by the steep decline of the 50-DMA which could see price penetrate support at the 38.2% Fibonacci retracement.
A break below may open up a path for further JPY losses against its major counterparts and could be indicative of strengthening market optimism.
AUD/JPY Daily Chart – Bullish MA Crossover Could Stoke Upside
AUD/JPY daily chart created using TradingView
A resurgence of risk appetite cushioned AUD/JPY’s collapse through Rising Wedge support in mid-June, as the sentiment-driven exchange rate remains constructive above the 200-day moving average (72.30).
The formation of a bullish Engulfing candle at the 61.8% Fibonacci retracement (72.72) pushed price back above the psychologically imposing 74 handle with buyers eyeing a potential retest of the yearly high (76.79).
AUD/JPY’s outlook seems skewed to the upside as both the RSI and Momentum indicators strengthen in step with recent price action.
However, resistance at the June 16 high (75.09) may prove a significant hurdle for AUD bulls.
Inability to successfully close above that barrier may cap near-term upside and see the Australian Dollar lose ground against its Japanese counterpart with a break of support at the 61.8% Fibonacci (74.16) clearing a path back to the 200-DMA (72.30).
| Change in | Longs | Shorts | OI |
| Daily | -13% | 18% | -1% |
| Weekly | -7% | 47% | 12% |
EUR/JPY Daily Chart – Bull Flag May Drive Prices Higher
EUR/JPY daily chart created using TradingView
EUR/JPY has resumed its climb back above the 120 level in recent days, after plunging 4% from the fresh yearly high set in June (124.43).
Development of both moving averages may encourage buying pressure as the 50-DMA looks to cross over the ‘slower’ 200-DMA potentially resulting in a bullish ‘golden cross’.
Moreover, price may be carving out a Bull Flag continuation pattern indicating the path of least resistance remains skewed to the upside.
A break above the June 12 high (121.80) validation level could see price make its way back to the yearly high (124.43), with the implied measured move – equaling the length of the ‘flag-pole’ – suggesting a surge to 2018 levels may be on the cards.
Having said that, the future of the EUR/JPY exchange rate remains dictated by market sentiment with current conditions supportive of risk-associated assets.
A surge of risk aversion could jeopardize the uptrend extending from the May low (114.40) with a break below the 200-DMA (119.83) and 50% Fibonacci (119.42) potentially opening up a path back to the 61.8% Fibonacci retracement (118.23) and 118 handle.
| Change in | Longs | Shorts | OI |
| Daily | 1% | 8% | 5% |
| Weekly | -47% | 70% | 1% |
GBP/JPY Daily Chart – Shooting Star at Trend Resistance Halts Tentative Recovery
GBP/JPY daily chart created using TradingView
The British Pound seems to be notably lagging its European and Australian counterparts as a temporary recovery back above the 50-DMA (133.83) was snuffed out by Pitchfork parallel resistance.
Although the Momentum indicator strengthen back into positive territory there is a hint of divergence with the RSI, suggesting the zone of inflection at the 135 handle may continue to suppress bullish price action.
To that end, a push to test the 200-DMA (136.25) remains a stretch for GBP/JPY and could see it push back to the June low (131.76) should price break through Pitchfork parallel support.
| Change in | Longs | Shorts | OI |
| Daily | 10% | 0% | 5% |
| Weekly | -5% | 24% | 9% |
-- Written by Daniel Moss, Analyst for DailyFX
Follow me on Twitter @DanielGMoss
