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Japanese Yen Technical Analysis: EUR/JPY, GBP/JPY, USD/JPY Key Levels

Japanese Yen Technical Analysis: EUR/JPY, GBP/JPY, USD/JPY Key Levels

Daniel Moss, Analyst

Japanese Yen Technical Analysis, EUR/JPY, GBP/JPY, USD/JPY, IGCS – Talking Points:

  • EUR/JPY carving out a Bull Flag continuation pattern just shy of the yearly high.
  • GBP/JPY at risk of a reversal after failing to breach key resistance.
  • USD/JPY may continue to grind lower as price remains confined by a descending Schiff Pitchfork.
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The Japanese Yen looks set to gain ground against the US Dollar and British Pound in the coming days. However, the Euro may extend its run higher against the haven-associated currency, as buyers eye the yearly high set in September. Here are the key levels to watch for EUR/JPY, GBP/JPY and USD/JPY rates.

EUR/JPY Daily Chart – Bull Flag in Play

EUR/JPY daily chart created using Tradingview

The EUR/JPY exchange rate seems poised to extend its topside surge to multi-month highs, after slicing through Descending Channel resistance and the psychologically imposing 125.00 mark.

With prices carving out a Bull Flag continuation pattern and the RSI eyeing a push into overbought territory, the path of least resistance looks to favour the upside.

A daily close above the December 4 high (126.68) is likely required to validate the bullish continuation pattern and carve a path for EUR/JPY to challenge the 2019 high (127.50).

The Bull Flag’s implied measured move suggesting price could climb an additional 2% from current levels to test key psychological resistance at 128.00.

Conversely, slipping back below the December 2 low (125.77) could neutralize near-term buying pressure and ignite a pullback towards the October high (125.08).

Retail trader data shows 27.30% of traders are net-long with the ratio of traders short to long at 2.66 to 1. The number of traders net-long is 32.40% higher than yesterday and 3.04% higher from last week, while the number of traders net-short is 35.41% higher than yesterday and 79.26% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/JPY prices may continue to rise.

Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/JPY-bullish contrarian trading bias.

GBP/JPY Daily Chart – Confluent Resistance Capping Upside

GBP/JPY daily chart created using Tradingview

GBP/JPY rates could reverse lower in the coming days, after buyers failed to hurdle confluent resistance at the Pitchfork median line and November high (140.31).

Significant bearish RSI divergence, in tandem with a bearish MACD crossover, is indicative of fading bullish momentum and may ultimately trigger further selling if prices slide back below the 21-day moving average (138.69).

Clearing that would likely bring support at the trend-defining 50-DMA and August low (137.74) into focus, with a daily close below opening the door for prices to challenge psychological support at 136.00.

Alternatively, a retest of the monthly high (139.44) could be on the cards if the 21-DMA successfully stifles selling pressure.

Retail trader data shows 45.89% of traders are net-long with the ratio of traders short to long at 1.18 to 1.The number of traders net-long is 9.28% higher than yesterday and 22.34% lower from last week, while the number of traders net-short is 2.04% higher than yesterday and 15.25% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/JPY prices may continue to rise.

Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/JPY trading bias.

USD/JPY Daily Chart – Schiff Pitchfork Guiding Price Lower

USD/JPY daily chart created using Tradingview

USD/JPY looks set to extend its grind lower as prices continue tracking within the confines of a descending Schiff Pitchfork.

With price travelling firmly below all four moving averages, and both the RSI and MACD positioned firmly below their respective neutral midpoints, the path of least resistance seems lower.

Breaching the monthly low (104.22) would probably generate a push to challenge the November low (103.44), with a daily close below carving a path for price to probe the March 10 low (102.00).

On the other hand, USD/JPY could rebound higher if support at the monthly low remains intact, with a daily close back above the 21-DMA (104.28) needed to bring confluent resistance at the Pitchfork parallel and 100-DMA (105.27) into the crosshairs.

Retail trader data shows 65.92% of traders are net-long with the ratio of traders long to short at 1.93 to 1.The number of traders net-long is 4.20% higher than yesterday and 4.54% lower from last week, while the number of traders net-short is 16.01% higher than yesterday and 1.01% 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.

-- Written by Daniel Moss, Analyst for DailyFX

Follow me on Twitter @DanielGMoss

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