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Yen Technical Outlook: USD/JPY Plunge Threatens Larger Correction

Yen Technical Outlook: USD/JPY Plunge Threatens Larger Correction

Michael Boutros, Strategist

Japanese Yen Technical Price Outlook: USD/JPY Near-term Trade Levels

  • Japanese Yen technical trade levels update – 240min Chart
  • USD/JPY working on third weekly decline- technical support in view
  • Support 125.86/95, 125.57, 124.51 (critical)- Resistance at 127.89, 128.08, 130.26 (key)
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The US Dollar is on the defensive for a third week Japanese Yen with USD/JPY plunging more than 3.7% from multi-year highs. The sell-off is now approaching initial support hurdles and we’re looking for possible price inflection just lower. These are the updated targets and invalidation levels that on the USD/JPY near-term chart.Review my latest Weekly Strategy Webinar for an in-depth breakdown of thisYen technical setup and much more!

Japanese Yen Price Chart – USD/JPY 240min

Japanese Yen Price Chart - USD/JPY 240min - Dollar vs Yen Trade Outlook - USDJPY Near-term Technical Forecast

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

Notes: After a stunning nine-week rally of more than 14%, USD/JPY is now attempting to mark a third consecutive weekly decline with price off more than 3.8% from the highs. We’ve been tracking this descending pitchfork formation extending off the April / May highs with price continuing to trade between the inner parallels for the past four sessions.

A break below the median-line keeps the focus on key support just lower at the 2015 high / 100% extension at 125.85/95 and the 2015 high-day close at 125.57 – both regions of interest for possible price inflection IF reached. More significant support eyed at the 38.2% Fibonacci retracement of the yearly range at 124.51. Initial resistance now at the weekly open / weekly high at 127.89-128.09 with a breach / daily close above the upper parallel needed to suggest a more significant low is in place. The yearly high-day close comes in at 130.26 in the event of a breakout.

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

Bottom line:The plunge off multi-year highs takes USD/JPY into the first major support hurdles. From a trading standpoint, look to reduce portions of short-exposure / lower protective stops on a stretch towards 126- rallies should be capped by the weekly range highs at 128.09 IF a larger correction is indeed underway here. Stay nimble into the close of the extended-holiday weekend with US core PCE on tap Friday.

Japanese Yen Trader Sentiment – USD/JPY Price Chart

Japanese Yen Trader Sentiment - USD/JPY Price Chart - Dollar vs Yen Retail Positioning - USDJPY Near-term Trade Outlook
  • A summary of IG Client Sentiment shows traders are net-short USD/JPY - the ratio stands at -2.50 (28.61% of traders are long) – typically bullish reading
  • Long positions are2.54% higher than yesterday and 9.17% lower from last week
  • Short positions are9.15% lower than yesterday and 12.90% lower from last week.
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/JPY price trend may soon reverse lower despite the fact traders remain net-short.

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US / Japan Economic Calendar

US / Japan Economic Calendar - USD/JPY Key Data Releases - Weekly Event Risk

Economic Calendar - latest economic developments and upcoming event risk.

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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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