Japanese Yen, USD/JPY, US Dollar, EUR/JPY, Euro- Talking Points
- USD/JPY hesitates after making a 24-year high, but momentum lingers
- EUR/JPY barely eclipsed prior peaks after a breakout but remains elevated
- If the Yen weakening trend recommences, how high can USD/JPY and EUR/JPY go?
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USD/JPY
USD/JPY made a 24-year high last week at 144.99 but it was unable to meaningfully break above an ascending trend line.
The trend line also coincided with the 161.8% % Fibonacci Extension of the late July pullback from 139.39 to 130.39. The 144.95 – 145.20 area might continue to offer resistance.
The pullback from the new high saw the price move back inside the upper 21-day simple moving average (SMA) based Bollinger Band. This could indicate a reversal may unfold or that bullish momentum might pause.
Due to the speed of the bullish move, the current sell-off has not yet been able to cross below most SMAs.
A bullish triple moving average (TMA) formation requires the price to be above the short term SMA, the latter to be above the medium term SMA and the medium term SMA to be above the long term SMA. All SMAs also need to have a positive gradient.
Looking at any combination of the 10-, 21-, 34-, 55-, 100- and 200-day SMAs, the criteria for a bullish TMA have been met. The 34-day SMA has just crossed above the 55-day SMA.
So, while the Bollinger Bands might be suggesting that there could be further downside, the SMAs have potential underlying bullish momentum intact.
The tussle between bullish and bearish signals may continue until either the price breaks below several SMAs, or the new high is taken out.
Support could be at the break points of 139.39 and 135.57.
In the bigger picture, a move below 130.39 would take out several support levels and might herald the end of significant Yen weakness. For now though, the ascending trend channel and underlying bullish momentum appear to be unimpaired.
EUR/JPY
EUR/JPY broke the topside of a Pennant Formation in late August and went on to make an 8-year high at 144.72. That level may offer resistance.
That run up broke above three previous peaks made in June, but the rally appears to have exhausted itself for now. In making that high, a Bearish Engulfing Candlestick was formed and might signal that a near term reversal could unfold.
Support may lie at the break points of 142.37 and 141.41, the latter currently coincides with the 10-day day simple moving average (SMA).
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--- Written by Daniel McCarthy, Strategist for DailyFX.com
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