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Talking Points:

  • USDJPY made a new 2017 low then almost immediately set off to post a ‘higher high’
  • This rather confusing process has yet to be resolved
  • The pair remains above trendline support, too, but only just

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The Japanese Yen’s daily chart against the Dollar is a little ambiguous right now.

USD/JPY posted a new low for 2017 back on September 8 but then proceeded to gain quite strongly to the point on Thursday of this week when it posted a ‘higher high’ in short order. The 110.99 point reached then is above the 110.63 peak scaled on August 31.

Japanese Yen Technical Analysis: Watch Trendline Support Closely

The question for investors now is whether the pair will indeed confirm this high and slink back again toward the year’s lows, or build a higher base around current levels. It’s impossible to be sure, of course. But if we pick apart USD/JPY’s latest burst of vigor we see that four straight days of gains into Wednesday of this week coincided with a global pickup in risk appetite which seems now to be a little exhausted. However, it’s tempting to conclude that was a one-off, perhaps even rather spurious reason for the pair’s altitude and that, had it not occurred we would have seen yet another lower low this week.

That said USD/JPY remains above trendline support stemming from its 2017 peak of 114.27 on July 11. This is not insignificant as the pair has spent precious little time anywhere near the top of this trendline, never mind above it, in the intervening months.

If you’re are uncommitted it might pay to wait now and see whether we get a daily close above the line. If we do there may be some chance that USD/JPY is building at least a new range base around current levels, with its upper reaches yet to be defined. However, if we don’t, then it seems likely that the range between the year’s lows in the 107 area and highs in the mid-110s are still the band you have to trade with.

Japanese Yen Technical Analysis: Watch Trendline Support Closely

That trendline support now comes in arounds 109.48.

The generally reinvigorated British Pound, meanwhile, has made considerable headway against the Japanese Yen and, indeed, has posted a new 2017 high of 148.35 just this week.

Japanese Yen Technical Analysis: Watch Trendline Support Closely

For the moment, GBP/JPY looks exceedingly comfortable within an uptrend channel from its late-August lows. However, it is also looking extremely overbought, unsurprisingly and a period of some consolidation must now be at least likely, even if the cross doesn’t retrace very far.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter:@DavidCottleFX