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Japanese Yen Technical Outlook: USD/JPY Breakout Tests for Higher Low

Japanese Yen Technical Outlook: USD/JPY Breakout Tests for Higher Low

2020-05-14 15:30:00
Michael Boutros, Strategist
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Japanese Yen Technical Price Outlook: Near-term Trade Levels

  • Japanese Yen technical trade levels update – Daily & 120min Charts
  • USD/JPY breakout testing initial support – weekly opening-range intact
  • Constructive while above 106.42 - resistance steady at 107.69

The Japanese Yen is more than 0.5% lower against the US Dollar this week with USD/JPY carving a clean weekly opening-range just above near-term uptrend support. This is the first test for the recent dollar breakout and it’s make-or-break here for the reversal play. These are the updated targets and invalidation levels that matter on the USD/JPY technical price charts. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Yen trade setup and more.

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Japanese Yen Price Chart – USD/JPY Daily

Japanese Yen Price Chart - USD/JPY Daily - Dollar vs Yen Trade Outlook - Technical Forecast

Chart Prepared by Michael Boutros, Technical Strategist; USD/JPY on Tradingview

Notes: In my last Japanese Yen Price Outlook we noted that USD/JPY was testing support at the 2019 low-day close, “with a close below 106.10 needed to fuel the next leg lower in the Dollar.” Price held that low into the close of last week with a breakout on Monday fueling recovery up to the 50% retracement of the April decline at 107.69. The monthly opening-range is set just above the 106-handle and we’re looking for the break for guidance.

Japanese Yen Price Chart – USD/JPY 120min

Japanese Yen Price Chart - USD/JPY 120min - Dollar vs Yen Trade Outlook - Technical Forecast

Notes: A closer look a Yen price action shows USD/JPY trading within the confines of a near-term ascending pitchfork formation with price reversing off the 75% parallel early in the week. The decline is now trading just above confluence support at the lower parallel / 61.8% retracement at 106.67 with the 61.8% extension / weekly open just lower at 106.42/49- look for downside exhaustion ahead of this threshold IF price is indeed heading higher. Monthly open resistance steady at 107.13 backed closely by 107.37. A breach above the median-line / 107.69 would be needed to mark resumption towards 108.09.

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Bottom line: USD/JPY is approaching near-term uptrend support and a hold above 106.42 is needed to keep the breakout viable in the days ahead. From a trading standpoint, look for downside exhaustion ahead of the lower parallel with a breach above 107.69 needed to fuel the next leg higher in price. Ultimately a break / close below 106.10 would be needed to put the bears back in control with such a scenario exposing the 61.8% retracement at 105.20. Review my latest Japanese Yen Weekly Price Outlook for a closer look at the longer-term USD/JPY technical trade levels.

Japanese Yen Trader Sentiment – USD/JPY Price Chart

Japanese Yen Trader Sentiment - USD/JPY Price Chart - Trade Outlook - Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long USD/JPY - the ratio stands at +1.15 (53.58% of traders are long) – neutral reading
  • Long positions are 8.82% higher than yesterday and 1.99% lower from last week
  • Short positions are 2.40% lower than yesterday and 9.90% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/JPY prices may continue to fall. Traders are more net-long than yesterday but less net-long from last week. The combination of current positioning and recent changes gives us a further mixed USD/JPY trading bias from a sentiment standpoint.
USD/JPY MIXED
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 22% 14% 18%
Weekly 2% 14% 7%
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--- Written by Michael Boutros, Technical Currency Strategist with DailyFX

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