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Japanese Yen Gains, But USD/JPY Up-Channel Remains Key

Japanese Yen Gains, But USD/JPY Up-Channel Remains Key

David Cottle, Analyst
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Japanese Yen Technical Analysis Talking Points:

  • USD/JPY has wilted markedly but key support has yet to give way
  • Even if it does, the market could be merely consolidating before pushing on
  • AUD/JPY has weakened with other AUD crosses but sprung back a little already

Join our analysts for live, interactive coverage of all major Japanese economic data at the DailyFX Webinars. We’d love to have you along.

The Japanese Yen shows some sign of unaccustomed strength against the US Dollar but it might be wise not to put too much faith in these.

They’re certainly tangible. USD/JPY poked through the lower boundary of its previously dominant uptrend channel on an intraday basis last week.

US Dollar Vs Japanese Yen, Daily Chart

Even though the channel remains secure when it comes to daily closes, the uptrend shows clear signs of exhaustion with the rate having retreated quite sharply from its recent high and trailing back to two-week lows.

Still, the Dollar’s run higher has been quite impressive, and it still seems most likely that what we are seeing here is a pause for breath rather than the harbinger of any significant reversal. That could be the case even if the uptrend channel is abandoned on a daily close.

It’s worth noting that the chart also contains evidence of a pennant formation, even as the Dollar appears to wilt.

US Dollar Vs Japanese Yen, Daily Chart

This often-telltale combination of convergent up- and downtrend lines is usually seen as a continuation pattern. In this case that would suggest a return to a rising Dollar once it plays out. Of course, this cannot be conclusive. Traders may want to take out a little more downside protection in any event given the clearly weakening daily chart bias.

Keep a close eye on channel support. Its fate over the next few days could be a key indicator.

The Japanese Yen may have strengthened more durably against the Australian Dollar thanks to the broad combination of factors which weakened the latter last week.

Australian Dollar Vs Japanese Yen, Daily Chart

However, that weakness has so far been contained by a band of support from October 11-17 which was quickly traded out of at the end of last week and has not been revisited since. It seems probable that this is a formidable short-term barrier for the bears and, while it holds Aussie Dollar bulls can remain hopeful of at least a correction higher.

Japanese Yen 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!

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