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Talking Points:

  • USD/JPY/s modest near-term uptrend appears to be back on track
  • However, broad range-trade looks likely into year-end after which the bulls have work to do
  • EUR/JPY’s long stall shows no sign of ending either way, but traders still have plenty to play with

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The Japanese Yen staged a little fightback last week.

The gains it logged against the US Dollar on the 13th and 14th shook USD/JPY out of the short-term uptrend channel which had previously been in place since November 27. However, the US Dollar has steadied a little since, to the point where the old uptrend is back on track, just.

Japanese Yen Technical Analysis: USD/JPY Rediscovers Its Uptrend

However, as you can see from the chart above USD/JPY is still very much bumping along the channel’s base having decisively rejected an attempt at the top last week. We’re now approaching the time of year when many financial markets face substantial thinning as participants take their holiday breaks. Official holidays will be unofficially lengthened in many cases and trading desks will likely be thinly staffed until at least the first week of 2018.

With this in mind it’s possible that USD/JPY will settle into broad range trade. The likely range boundaries appear to be December 12’s intraday high of 113.76 to the upside and December 6’s low of 112.00 below. December 1’s wide intraday range could also play a role here, and that day’s intraday low of 111.38 might also be worth keeping in mind.

Japanese Yen Technical Analysis: USD/JPY Rediscovers Its Uptrend

The wildcard here is probably not technical so much as fundamental. The US Dollar has been driven largely by tax reform’s tortured passage through Congress in recent weeks, a passage which seems to be finally nearing its end.

Once it does, dollar bulls probably need to reassert their claim to early November’s highs if they are not to look ever more ominously like some sort of market cap.

Japanese Yen Technical Analysis: USD/JPY Rediscovers Its Uptrend

A bearish moving average crossover occurred at the end of November, when the 20-day average crossed below its 50-day counterpart. That, too suggests that those highs may prove a big ask.

But that struggle is likely to await the new year.

The Euro meanwhile remains stymied against the Japanese currency. EUR/JPY booked quite impressive climbs earlier this year. They had a solid fundamental basis as Eurozone economic data improved and the European Central Bank inched closer to removing monetary accommodation even as Japan’s stimulative spigots were left wide open.

However, the climb stalled in September and has remained in effective stasis ever since. That’s not to say that traders have had nothing to play with. Selling on approaches to 134.50 and buying on dips to 131.00 would have served them well ever since.

Japanese Yen Technical Analysis: USD/JPY Rediscovers Its Uptrend

As 2017 draws to a close there is no obvious sign on the chart that it won’t continue to do so.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter:@DavidCottleFX