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USD/JPY Technical Analysis: 2017 Lows Worryingly Near

USD/JPY Technical Analysis: 2017 Lows Worryingly Near

David Cottle, Analyst


Talking Points

  • The US Dollar remains stuck in a long downtrend against the Japanese Yen
  • Sterling is in a similar predicament
  • There’s not much between current levels and 2017’s lows, bulls have much to do.

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When looking at the Japanese Yen daily charts, it’s hard to avoid the feeling that something has to break soon, at least for the USD/JPY pair.

It has been wandering around quite inconclusively for fully 20 trading sessions since the big falls of May 16 and 17.

In so doing it has drifted toward the year’s lows, but not touched them, while at the same time mounting no significant upside challenge whatever to the 113.00 level. That’s where key resistance formed by the year’s persistent downtrend comes in.

Clearly the Dollar is closer to those 2017 lows than it is to the top of that downtrend, which will need to be recaptured if the pair is to make any consistent upward progress. However, assuming that bulls have the appetite to even try for that, there are one or two resistance levels which they are going to have to conquer first.

They’ll include June 1’s closing high at 111.34 and the 111.74 level. That has quite efficiently contained gains since that May 17 fall and may prove tough.

But if even those relatively modest rises prove too much for any daily push (and don’t forget the pair is only at 110.20 or so right now), then it looks very much as though the USD/JPY downtrend will endure, with another test of the year’s lows all-too likely.

In the aftermath ofthe UK general election, it perhaps behooves us to take a look at the British Pound.

Given the shock result of that vote, with a seemingly secure government failing to secure a majority, GBP/JPY has been perhaps eerily calm. The cross remains in a clear, short-term downtrend, of course. But that has been in place since May 10 and hasn’t notably accelerated in recent days.

Assuming it endures, the British Pound is admittedly at least short of obvious support as USD/JPY until we come to the year’s lows. These are lurking not very far away from current levels, at 135.59. While it would be rash to rule out a test of these in due course, it doesn’t so far appear to be coming notably faster than it was before Friday’s vote news.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

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