Japanese Yen Weekly Forecast: Neutral
- Japanese Yen gave up progress on Bank of Japan disappointment
- USD/JPY is eyeing a bearish Head & Shoulders chart formation
- GBP/JPY key trendline breakout falls short, eyes on key support
This week was quite a disappointment for the Japanese Yen after the fireworks around the Bank of Japan’s monetary policy announcement. Those hoping for a more meaningful shift towards the hawkish side were left disappointed. Even though the central bank adjusted Yield Curve Control (YCC), the BoJ lowered longer-term inflation forecasts, opening the door to continued easing.
While USD/JPY was left little changed over the past 5 days, the Japanese Yen gave up gains of as much as 2.4% against the US Dollar. USD/JPY rallied over 1.2% just on Friday alone, reversing almost all the losses seen earlier in the week. Friday’s gain marked the best single-day performance since April. With that in mind, how are things shaping up for the currency ahead?
On the daily chart below, the currency pair can be seen carving out a bearish Head & Shoulders chart formation. The ceiling of the right shoulder is around 141.95 and is immediate resistance. The neckline seems to be around the 38.2% Fibonacci retracement level at 138.25. Breaking lower opens the door to extending lower. Otherwise, June highs are next at 145.
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USD/JPY Daily Chart
Meanwhile, GBP/JPY is on the verge of potentially turning more technically bearish. There was a breakout under the rising trendline from March. However, Friday’s reversal higher undermined the breakout and reinforced the 50-day Moving Average (MA). The latter seems to be maintaining the broader upside bias for the time being.
As such, clearing under the 50-day MA would offer an increasingly bearish bias. But, for the time being, it seems neutral. In terms of resistance, watch the June high at 184.01. Clearing above this point exposes the November 2015 high at 188.81.
GBP/JPY Daily Chart
--- Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com
