USD/JPY points to recovery

FX:USDJPY   U.S. Dollar / Japanese Yen
Following two consecutive sessions of decline, the US Dollar entered a period of consolidation on Friday.

Given that technical indicators are already showing signs of recovery, it is likely that the pair eventually manages to accelerate from the newly-formed 2017/2018 low of 104.62 and approach a trend-line located near 105.80. This yearly low is likewise reinforced by the monthly S1. In order to fulfil the aforementioned scenario, the pair still needs to overcome the 55-hour SMA .

Despite technical signals pointing to soon appreciation, the weakness of the US Dollar which could be driven by such global political developments as US tariffs on Chinese imports are likely to push the rate even lower past the bottom boundary of a long-term channel and towards the weekly S1 at 104.30 and 104.11, respectively.

After reaching a new 2017/2018 low of 104.62 late on Friday, the US Dollar picked up momentum and had therefore shot up to 105.63 by Tuesday morning.

This rapid change in sentiment was due to investors re-gaining confidence in global markets and thus relocating their funds from safe-haven currencies, including the Japanese Yen.

The Greenback dashed through the 55– and 100-hour SMAs and the weekly PP during the previous session and, at the time of this analysis, was testing the 200-hour moving average. This line is located near the weekly R1 and the prevailing trend-line circa 105.80.

It is likely that bulls do not have sufficient strength to overcame this resistance after yesterday’s surge, thus allowing for a minor decline today. A possible downside target is the 55-hour SMA at 105.10.

The US Dollar’s movement against the Yen was bounded between the 100– and 200-hour SMAs on Tuesday. Some additional volatility was introduced during the second half of the day; however, the pair lacked enough force to dash through any of these two barriers.

The pair is trading near a medium-term channel located at 105.80. It is expected that this pattern is eventually breached to the upside, thus paving the way for a surge during the following weeks.

In the short term, it is likely that the pair continues trading within the same range until the US GDP data release at 1230GMT provides the necessary momentum for a breakout.

Technical indicators favour bearish correction in this session. Apart from the 105.35 area, no additional support levels are restricting the pair until its 2017/2018 low of 104.62.

The US Dollar rallied significantly against the Yen on Wednesday, seemingly being supported by a decrease in risk sentiment. The pair gained 1.43% throughout the day until it reversed at the psychological 107.00 mark.

Bears managed to re-gain some of their lost positions during the Asian session, thus pushing the rate towards the upper boundary of the previously-breached channel.

The same bearish sentiment is likely to dominate the market today. The Greenback could target a support cluster formed by the 55– and 200-hour SMAs near 105.90. This level should likewise mark the ultimate low for today.

Conversely, bulls might still try to use the slight potential up to the 107.50 level where the monthly PP and the weekly R2 are located.

Following a reversal from the two-week high of 107.00 late on Wednesday, the US Dollar began weakening against the Yen once again. Thursday’s trading session marked a slight tendency south down to the 55-hour SMA circa 106.20.

Technical indicators suggest that the same bearish sentiment is likely to guide the rate in this session, as well. Thus, the ultimate low for today should be set near the 105.80 level where the 100– and 200-hour moving averages are located. Meanwhile, a possible downside target for the first part of next week should be 105.00.

In case bulls nevertheless take the upper hand in the market, gains are unlikely to surpass 106.80 where a six-week channel is located.
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