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Japanese Yen Technical Analysis Talking Points:

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The Japanese Yen has retraced a little against the US Dollar since the ‘flash crash’ of last week which saw USD/JPY fold.

However, trade since has been perhaps curiously indecisive with a succession of daily chart candles which evince a trading range much broader than that between the opening and closing levels. This sort of pattern can suggest a high degree of uncertainty in the market, but it’s of course possible that calendar factors are also playing a part. If that’s the case it may be wise to wait a little longer before becoming involved, to get a clearer picture of what the market view is once trading desks are fully staffed.

Below last week's levels: US Dollar Vs Japanese Yen, Daily Chart

Still, it is notable that, five days after the crash- which came in that fallow period between the US close and Asia’s open, USD/JPY has still failed to recapture the levels seen before it occurred.

Unless and until Dollar bulls can make good at least that loss, then it seems likely that the overall market focus will remain to the downside. Last week’s broad trading range is probably spurious, and its lower reaches probably don’t tell us much about likely support levels as a result.

However, two Fibonacci retracement levels of the rise up from 2018’s March low to its October peak might still be worth watching.

The first is 108.50. That represents the fourth 61.8% retracement. The Dollar has managed to fight back above that level since last week. If it holds as support the bulls might be able to build a modest base above it. However this prospect won’t be confirmed until we’ve seen at least a weekly close above that level and preferably more than one.

Should that level rather give way then the fifth retracement at 107.08 is all that will stand between the market and the total erasure of all 2018’s gains.

That day of broad Yen strength last week is casting its baleful shadow across all the daily technical charts. However in the case of Sterling it is perhaps notable how closely the fall that day corresponded with the downtrend channel previously established back on November 29.

Downtrend Holds: UK Pound Vs Japanese Yen, Daily Chart

The fall of January 2 may have taken GBP/JPY below the channel bottom intra-day, but the closing level was more or less on the line.

It’s probably reasonable to assume then that this channel still has something to tell investors and that the current apparent failure at the channel top will lead to further falls, probably unless the previous significant high of 143.94 can be durably recaptured.

Resources for Traders

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!