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Japanese Yen Outlook: USD/JPY Rebounds Off Support- Recovery Levels

Japanese Yen Outlook: USD/JPY Rebounds Off Support- Recovery Levels

2020-08-06 15:30:00
Michael Boutros, Strategist
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Japanese Yen Technical Price Outlook: USD/JPY Weekly Trade Levels

  • Japanese Yen technical trade levels update – Weekly Chart
  • USD/JPY downtrend halted at critical support at 104.12/45
  • Broader risk remains lower sub-107.68 – initial support 105.20

The Japanese Yen is poised to mark a third consecutive weekly advance against the US Dollar with USD/JPY down 0.27% heading into tomorrow’s US Non-Farm Payroll report. While the broader risk remains weighted to the downside, the immediate decline may be vulnerable early in the month as price responds to downtrend support. These are the updated targets and invalidation levels that matter on the USD/JPY weekly price chart. 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 Weekly

Japanese Yen Price Chart - USD/JPY Weekly - US Dollar vs Japanese Yen Trade Outlook - USDJPY Technical Forecast

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

Notes: In last month’s Japanese Yen Weekly Price Outlook we noted to be on the lookout for, “topside exhaustion ahead of yearly open resistance at 108.62 on recoveries IF price is indeed heading lower.” USD/JPY registered a high at 108.16 in the following days before plummeting more than 3.6% into critical confluence support 104.12/45- a region defined by the 2019 swing lows and the 100% Fibonacci extension of the March decline. The focus is on the recovery off this mark into the open of August trade with the broader short-bias vulnerable while above.

Initial weekly resistance stands at the October 2019 lows at 106.48 with medium-term bearish invalidation now lowered to the 61.8% retracement of the June decline at 107.69 – and area of interest for possible topside exhaustion IF reached. Initial support steady at the 61.8% retracement of the March rally at 105.20 with a close below 104.12 needed to keep the broader short-bias viable toward the 78.6% retracement at 103.43.

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Bottom line: The Japanese Yen responded to a key technical barrier last week with and leaves the bears vulnerable early in the month. From a trading standpoint, be on the lookout for topside exhaustion / swing high ahead of 107.68 on recoverieswith a break / close below 105.20 needed to keep the focus lower. Ultimately a pivot below 104.12 would mark resumption of the broader downtrend. I’ll publish and updated Japanese Yen Price Outlook once we get further clarity on the near-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 +1.24 (55.31% of traders are long) – weak bearish reading
  • Long positions are8.98% lower than yesterday and 15.34% lower from last week
  • Short positions are 11.19% higher than yesterday and 18.07% 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. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/JPY price trend may soon reverse higher despite the fact traders remain net-long.
USD/JPY BEARISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 9% -6% 5%
Weekly 82% -22% 33%
Learn how shifts in USD/JPY retail positioning impact trend
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--- Written by Michael Boutros, Technical Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

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

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