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Keep an Eye on USD/JPY as US Dollar at Risk of Major Trend Reversal

Keep an Eye on USD/JPY as US Dollar at Risk of Major Trend Reversal

David Rodriguez, Head of Product

- US Dollar trades at make-or-break levels across the board, keep an eye on USD/JPY

- Holding these key levels would keep broader Dollar trend intact, breakdown points to bigger reversal

- See more information on DailyFX on the Real Volume and Transactions indicators

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The US Dollar has fallen sharply to major volume and price-based support versus the Euro, Yen, British Pound, and others. Whether it holds will likely determine much broader direction.

EURUSD

Total Buy Volume Executed, Total Sell Volume Executed, Net Volume Executed (Buy-Sell)

Length of bar indicates the sum of Buy and Sell volume.

Data source: FXCM Real Directional Volume Indicator, Chart source: R. Prepared by David Rodriguez

The Euro has bounced sharply off of key volume-based support versus the US Dollar and now trades at the top of its large congestion range. There remains little in the way of notable resistance higher until the late-August spike-high near $1.17. And indeed the US Dollar looks at risk of further declines—particularly if it trades below ¥119 versus the Japanese Yen.

USDJPY

Total Buy Volume Executed, Total Sell Volume Executed, Net Volume Executed (Buy-Sell)

Length of bar indicates the sum of Buy and Sell volume.

Data source: FXCM Real Directional Volume Indicator, Chart source: R. Prepared by David Rodriguez

The US Dollar seems at a potentially significant turning point versus the Japanese Yen as it tests major volume and price-based congestion support at ¥119. A break below said level would help confirm that the USD has made a sustained turn lower and would have fairly important implications for other USD-based currency pairs. Yet trading above keeps markets in suspense as the Greenback would likely stick to its large and choppy trading ranges across the board.

GBPUSD

Total Buy Volume Executed, Total Sell Volume Executed, Net Volume Executed (Buy-Sell)

Length of bar indicates the sum of Buy and Sell volume.

Data source: FXCM Real Directional Volume Indicator, Chart source: R. Prepared by David Rodriguez

The British Pound trades just below significant resistance versus the US Dollar at the $1.5700 mark, and the next move may prove pivotal as the USD stands at the brink of a potential breakdown. We suspect that a GBP/USD breakout would coincide with a USD/JPY break below ¥119 and similar moves from the Commodity Bloc pairs (see below).

AUDUSD

Total Buy Volume Executed, Total Sell Volume Executed, Net Volume Executed (Buy-Sell)

Length of bar indicates the sum of Buy and Sell volume.

Data source: FXCM Real Directional Volume Indicator, Chart source: R. Prepared by David Rodriguez

The Australian Dollar trades just short of substantial volume-based resistance versus the US Dollar in the $0.7300-0.7450 range, and a break higher would help confirm a larger USD breakdown. Short-term support is seen at previous resistance at $0.7250.

USDCAD

Total Buy Volume Executed, Total Sell Volume Executed, Net Volume Executed (Buy-Sell)

Length of bar indicates the sum of Buy and Sell volume.

Data source: FXCM Real Directional Volume Indicator, Chart source: R. Prepared by David Rodriguez

The US Dollar has just narrowly held an important price and volume-based congestion range versus the Canadian Dollar, and a break below C$1.3000 would act as confirmation that the broader US Dollar trend has turned.

NZDUSD

Total Buy Volume Executed, Total Sell Volume Executed, Net Volume Executed (Buy-Sell)

Length of bar indicates the sum of Buy and Sell volume.

Data source: FXCM Real Directional Volume Indicator, Chart source: R. Prepared by David Rodriguez

The New Zealand Dollar has traded above key price and volume-based congestion resistance versus the US Dollar in the $0.6300-0.6400 and short-term risks favor further gains. The larger test may come as the pair approaches major volume congestion levels from $0.6500-0.6700.

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

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

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