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Japanese Yen Technical Analysis: Wilting USD/JPY Faces Key Test

Japanese Yen Technical Analysis: Wilting USD/JPY Faces Key Test

David Cottle, Analyst

Japanese Yen Technical Analysis Talking Points:

  • The Japanese Yen is back in the USD/JPY driving seat
  • Important Fibonacci retracement is threatened, but the next one looks safe enough for now
  • EUR/JPY seems to offer bulls more opportunity

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The Japanese Yen is once again seeing gains, with a USD/JPY downtrend now re-establishing itself.

Last week saw that currency pair pretty stuck, but this week has seen it slide once again. Indeed, it is now flirting with the second, 38.2% Fibonacci retracement of the rise up from the lows of late March to July’s highs. That comes in at 109.92, just a whisker above the current market.

Japanese Yen Technical Analysis: Wilting USD/JPY Faces Key Test

We haven’t seen a daily close below this point since June 25 and, if we see one this week, downside focus will coalesce around the next, 50% retracement which lies at 108.93. However US Dollar bulls could be in a bit of trouble if that level is reached because it would mean that all the climb up from late May had also been retraced, which could mean the pair gives back all its gains all the way down to 104.72. However, that scenario looks too extreme for current evidence, and the pair seems likely to hold above that 50% retracement barring further shocks.

That said, USD/JPY is in a solidly respected downward channel, which has persisted since July 20 and of which it looks set to try the downside.

Japanese Yen Technical Analysis: Wilting USD/JPY Faces Key Test

That bearish target comes in at 109.48.

Meanwhile the Euro seems to be doing a little better against its Japanese rival, although its uptrend remains young and it might not make sense to fully back it at this point.

Japanese Yen Technical Analysis: Wilting USD/JPY Faces Key Test

It would perhaps be a better idea to wait and see whether EUR/JPY can rise back to the point where it can manage a few daily closes within its former trading range (see the chart above). If it can, then bulls might start to return in more earnest, perhaps initially targeting resistance at 129.43. That was the previous significant top, reached on July 31.

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Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

--- Written by David Cottle, DailyFX Research

Follow David on Twitter @DavidCottleFX or use the Comments section below to get in touch!

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

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