Japanese Yen, JPY Index, USD/JPY, CAD/JPY, GBP/JPY – Talking Points:
- USD/JPY eyeing retest of monthly low after failing to breach key resistance.
- CAD/JPY Ascending Triangle pattern hints at further upside.
- Head and Shoulders pattern could inspire GBP/JPY sellers.
The haven-associated Japanese Yen appears poised to outperform the US Dollar and British Pound in the near-term, as both exchange rates fail to breach key resistance. However, JPY may continue to lose ground to its commodity-linked counterparts as CAD/JPY eyes a push to retest its post-crisis high.
USD/JPY Daily Chart – May Low Capping Upside
USD/JPY daily chart created using TradingView
USD/JPY rates look to be at risk of reversing lower in the near-term, as buyers fail to breach key resistance at the May low (105.99) and price slides back below all four moving averages.
An extended downside push looks likely given USD/JPY continues to track within a Descending Schiff Pitchfork and the RSI is travelling firmly below its neutral midpoint.
With that in mind, a daily close below the psychologically imposing 105.00 mark is needed to validate bearish potential and carve a path for price to test confluent support at the Schiff Pitchfork median and September low (104.00).
Conversely, a close above the 21-DMA (105.54) could encourage would-be buyers and generate a push to retest the monthly high (106.11) and 100-DMA (106.28).
| Change in | Longs | Shorts | OI |
| Daily | -26% | -4% | -8% |
| Weekly | -30% | 5% | -3% |
CAD/JPY Daily Chart – Ascending Triangle in Play?
CAD/JPY daily chart created using TradingView
The CAD/JPY exchange rate appears to be eyeing a push to retest the August high (81.58), after slicing through all four moving averages and bursting above key resistance at the July high (80.14).
In fact, price appears to be carving out a bullish Ascending Triangle formation which suggests that an extended topside push may be on the cards, if CAD/JPY is able to remain constructively positioned above the psychologically pivotal 80.00 mark and sentiment-defining 200-DMA (79.74).
A daily close above the monthly high (80.60) is needed to validate bullish potential and open a path towards the August high (81.58).
On the other hand, a break below 80.00 would probably ignite a more extended pullback and could bring confluent support at the Ascending Triangle hypotenuse and the October 7 swing-low (79.19) into focus.
GBP/JPY Daily Chart – Carving Out Head and Shoulders Top
GBP/JPY daily chart created using TradingView
Finally, the path of least resistance for GBP/JPY rates seems skewed to the downside, as price carves out a bearish Head and Shoulders reversal pattern and buyers fail to hurdle resistance at the August low (137.75).
A bearish crossover on the MACD indicator, in tandem with the RSI sliding back below 50, could inspire would-be sellers and ultimately lead to an extension of the exchange rate’s retreat from the September high (142.71), if support at the 136.00 mark gives way.
With that in mind, a daily close below the October 7 swing-low (135.87) would probably facilitate an extended downside push to test the neckline of the bearish reversal pattern, with a break below the 78.6% Fibonacci (133.75) needed to bring the May low (129.30) into play.
| Change in | Longs | Shorts | OI |
| Daily | -9% | 14% | 6% |
| Weekly | -13% | 2% | -3% |
-- Written by Daniel Moss, Analyst for DailyFX
Follow me on Twitter @DanielGMoss
