Japanese Yen Technical Analysis: USD/JPY Tests Key Resistance
- USD/JPY is currently undergoing what could be a crucial nea- term test
- If the bears win then this year’s long downtrend will endure
- Things look better for GBP/USD, but the year’s peak looms ahead
Find out where your currency-of-the-moment stands in the trading community’s affections at the DailyFX sentiment page
In my last technical look at USD/JPY, I suggested that May 15’s closing high of 113.76 might provide bulls with their first real test of the current, impressive uptrend.
The US Dollar posted two days of sharp falls after making it, suggesting that it might be quite a formidable barrier. Indeed, it proved to be so just this week with Wednesday’s intraday high coming in at exactly that point. However, at the time of writing (0230 GMT Friday), USD/JPY has just managed to top 113.76 for the first time since it made the high back in mid-May, if only by a whisker so far.
If bulls can force the pace and bring about a daily (and, at this point, weekly) close above it, then the last significant top, May 10’s 114.30, will beckon. Above that looms March 13’s 115.41 and the year’s highs beyond.
However, if we take a few steps back and look at the chart we can see that that May 10 peak is crucial. If the current uptrend fails below it then we will have seen a second significant lower high and long, gradual downtrend in place for all of 2017 will continue its dominance.
Meanwhile the British Pound has also managed a good showing against the Japanese currency and may also be facing a key test. GBP/JPY has closed higher for 19 of the past 22 trading days. The fundamental news behind this gain is that the Bank of England has struck a more hawkish policy tone while the Bank of Japan remains committed to extraordinarily loose monetary settings.
That variance has taken GBP/JPY to within a very short distance of 2017’s high, the 148.10 struck on May 10. However, the climb to that high involved lots of successive green candlesticks followed by a more gradual slide. History might well repeat itself.
Sterling’s Relative Strength Indicator nudging up toward what most analysts would consider overbought territory. While the cross may yet reach and even surpass that May peak, it’s doubtful that the bulls have too much more gas in the tank.
--- 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.