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Japanese Yen Forecast: USD/JPY Breakout Imminent- FOMC Levels

Japanese Yen Forecast: USD/JPY Breakout Imminent- FOMC Levels

Michael Boutros, Strategist

Japanese Yen Technical Price Forecast: USD/JPY Weekly Trade Levels

  • Japanese Yen technical trade levels update – Weekly Chart
  • USD/JPY Plunges to range lows at trend support ahead of FOMC
  • Support 109, 107.87-108.19 (critical)- Resistance at 110, bearish invalidation 110.53

The Japanese Yen rallied more than 0.6% against the US Dollar since the start of the week with USD/JPY plummeting into the range lows at multi-month uptrend support – the battle lines are drawn. These are the updated targets and invalidation levels that matter on the USD/JPY weekly price chart heading into tomorrow’s highly anticipated FOMC rate decision. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Yen technical setup and more.

Japanese Yen Price Chart – USD/JPY Weekly

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

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

Notes: In my last Japanese Yen Weekly Price Outlook (July) we noted that USD/JPY was testing a, “significant resistance confluence at the 2019/2020 high-week closes / 61.8% retracement at 111.60/98.” Price registered a high at 111.65 that week before reversing with the decline plummeting more than 2.6% before settling just above pitchfork support. We’re looking for a breakout of this multi-week consolidation with the broader threat for a larger pullback while within this embedded descending channel formation (red).

USD/JPY is at uptrend support here (near ~109.07) just ahead of the Fed and the focus is on the weekly close with respect to this trendline. Advances should be capped by channel resistance (currently near ~110) IF price is indeed heading lower with a break exposing the August lows at 108.72 and critical support at 107.86-108.19- a region defined by the 2017 low-week close, the 100% extension and the 38.2% Fibonacci retracement of the yearly range. Ultimately a breach / close above the 61.8% retracement at 110.53 would be needed to mark resumption of the broader uptrend towards 111.60s again.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Bottom line: USD/JPY is now testing the lower bounds of a multi-week price range and we’re looking for a breakout in the days ahead to offer guidance. From at trading standpoint, a good zone to reduce short-exposure / lower protective stops – look for a reaction / price inflection the yearly upslope with a close below threatening a larger correction towards 108. Stay nimble over the next 24 hours with central bank rate decisions from the Bank of Japan (BoJ) and the Federal Reserve on tap. I’ll publish an updated Japanese Yen Price Outlook once we get further clarity on the near-term USD/JPY technical trade levels – I’ll be discussing this setup in tomorrow’s Mid-Week Market Update Webinar.

Japanese Yen Trader Sentiment – USD/JPY Price Chart

Japanese Yen Trader Sentiment - USD/JPY Price Chart - Retail Positioning - Technical Outlook
  • A summary of IG Client Sentiment shows traders are net-long USD/JPY - the ratio stands at +1.22 (54.96% of traders are long) – weak bearish reading
  • Long positions are18.10% higher than yesterday and 1.75% higher from last week
  • Short positions are 18.29% lower than yesterday and 17.10% lower 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 further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger USD/JPY-bearish contrarian trading bias from a sentiment standpoint.


Key US / Japan Data Releases

Key US / Japan Economic Data Releases - USD/JPY Weekly Event Risk - BoJ, FOMC on tap

Economic Calendar - latest economic developments and upcoming event risk.

Previous Weekly Technical Charts

--- 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.