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Japanese Yen Technical Analysis: USD/JPY Top Stays Elusive

Japanese Yen Technical Analysis: USD/JPY Top Stays Elusive

David Cottle, Analyst


Talking Points

  • USD/JPY has broken above its previous peak, but not conclusively
  • It needs a daily or weekly close above it and, so far, that looks unlikely
  • That puts focus on near-term support

The new DailyFX forecasts are out. What does the third quarter hold for major currencies, gold and oil?

A week ago, the Japanese Yen was under more pressure against the US Dollar.

USD/JPY had just forced an upside trendline break and the previous significant high – May 10’s 114.37 – was within striking distance. The Dollar got there alright, breaking in to the 114.40s on July 11, but victory was partial. It only managed to top that summit intraday, still hasn’t managed a higher daily close and has now retreated below. So, has that May 10 top been rejected and is yet another lower high in the offing?

Well, USD/JPY could be said to remain in an uptrend, even if only just.

That channel neatly captures all the trading action from June 14’s low to the present day, but it may also offer something of a false positive. After all, the lower bound consists of precisely one intraday low, only about 48 hours old at the time of writing. The amount of reassurance this chart offers bulls must surely be limited.

The trendline below on the other hand passes through three intraday closing levels and two intraday lows. From that point of view, it looks more significant and, as you can see, USD/JPY broke below it this week.

The pair is currently very close to support around 113.11. That was July 6’s close and a region around which which had coalesced around for the four previous days. There would also appear to be support around the 111.96 mark. These will have to hold if the rejection of that May 10 peak is not to become conclusive, and the hour is getting late.

AUD/JPY meanwhile remains in a more obviously robust uptrend. However, its Relative Strength Index suggests a degree of overbuying which has not subsided to the extent that it has in other Yen crosses, notably EUR/JPY. That is looking less overbought despite making recent highs not seen since early 2016. There may be safer short-Yen vehicles than the Aussie in the coming week.

--- 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.