FX_IDC:USDJPY   U.S. Dollar / Japanese Yen
Dear Friends
In this post I would like to review USDJPY             pair.
First let’s look at the USD currency.

First thing, I would like to show you is this weekly weighed average YEN (weekly)



If you look at it from a bearish point of view it made a false breakout of the key resistance level and just made a bearish shooting star .




But is not quite bearish yet. Why?

Because it is still bouncing off the EMAs and until we take the EMAs out of the way we cannot say it is a bearish market.

Also if you go to the monthly you will see that this is still a valid bullish market. Just bounced off the EMAs and still can go a lot higher.



I would say it is too early to say whether that strong YEN sell off last week going to continue

Now let me to add some lines:


It becomes more complicated when I draw lines. Price is trapped between support and resistance



The above chart is daily. Again see that how hard it has to fight with the falling trend line and EMAs to be bearish .
You may ask how did I find the support here. See the monthly again.


If you draw these lines you will get support on daily.

Look at the monthly one more time here.




It can be still a potentially a big bullish market if it breaks the falling trend lines as resistance.
Next lets look at the withed average indices

It is average of CAC DAX             FTSE             FTSEMIB NIKKEI NIKKEI futures .

The above is monthly.
Lets look at the correlation between indices and YEN



As can be seen they are negatively correlated and when one of the moves higher the other moves lower (it is daily). If you want to have this chart on you watchlist, just see the screenshot title and add that into your watchlist by clicking on the “Symbol” and type the formula in there.

The lower the indices go the higher YEN goes. For example see FTSE 100             . It just made all time highs.



Or CAC



So after making all time highs, Indices had a pullback last week and that pullback caused YEN to shoot up

well let me get back to the weighted average
Surely Indices have a lot of upside room as you can see.



If we see indices continuing making higher high then YEN should be a lot cheaper

But if I go to the daily I see that price just bounced off a rising trendline and heading lower. Also see how is going to have another pullback after touching EMAs. This is a signal of stronger YEN in short term!




Personally I think we might see a wedge formation before seeing Indices pushing higher and seeing YEN falling.


If we see indices gets to here, then that means YEN going to be a beast for a while.




Next I would like to review JXY             . Weekly



JXY             is YEN currency index. Like DXY             but Japanese version.

Let me zoom in


This is very bearish right?
Pullback from midline and EMAs.
But how does related to YEN currency? Let’s review the correlation



Highly correlated. If JXY             heading lower we shall see YEN falling too. JXY             is clearly bearish . I wish we could see a bullish price action for indices too then we were absolutely certain about YEN bearishness. But it is not

But also see H&S formation on JXY             . Another bearish formation confirmation for YEN.



If we see a break of the neckline YEN going to be in trouble.

Next I would like to investigate YEN futures .
See how it made a H&S at the top of the channel and then made a flag formation but due
Comment: to the massive drop of Indices this flag breakout did not turn out to be true breakout but see how a few days ago it made a false breakout of the highs.
Futures are also highly correlation with YEN averages. (sorry no chart to show that)

It is almost very hard to make a decision where YEN is heading now but if I zoom out to weekly you will see a wedge formation.

weekly suggest the rotation of the wedge has not been completed and we should see the price heading lower. Also please look at the last candle. It is very bearish. Like JXY



So far we stay more on bearish side but I am still not convinced with the YEN bearishness because of the Indices heading lower. YEN and Indices cannot move together to the downside

Next I would like to review Nikkei and Nikkei futures.
I have already reviewed weighted average indices but Nikkei is a Japanese index and should be reviewed in this section.

I have been watching this Inverted H&S on Nikkei and in fact in most of the indices for weeks up until the point that the uptrend was broken and we see that the price has just returned into that Neckline. Still is bullish formation IF stays above the Neckline



I like it even more if we go to weekly. Bounce off the EMAs also going to add to equation.


if you look at the monthly like other indices, FTSE, CAC DAX EUSTX50 has more room to the upside.



See how EMAs acting as a support above.
See how Nikkei and YEN average is negatively correlated. The higher the Nikkei goes the lower the YEN goes.

red line is weighted average YEN

You may ask why different countries have different indices. I have the same question! I am going to compare CAC with Nikkei and they are absolutely the same !!!



Next I would like to review Nikkei futures. This is even more bullish. 1) See the long term support line 2) see how weekly price bouncing off the EMAs. 3) On daily (like NIKKEI) I have Inverted H&S and the price is sitting at the Neckline as a support.



and if I zoom in



Next I would like to review Japanese 10 Yrs Bonds.

Let’s see the correlation between bonds and YEN.



It is quite clear that they are positively correlated. The lower the bonds go the cheaper the YEN will be. Is not it?



It is been 3 months that I am waiting for this target.



and add this H&S to this scenario



See how beautifully right shoulder pulled back after touching the falling trend line

And very bearish Shooting star on Weekly



Next I would like to review Yields. The chart below shows that plus I compared it with Weighted average YEN

Comment: See how price returned into the wedge formation on Friday. Also see how 1) Falling trend line 2) Rising trend line both acted as supports



If you go to weekly you can see how sever the bounce was last week. See the last weekly candle and see how it closed… But remember it has EMAs to fight with now…



The higher it goes the cheaper the YEN going to be. But do not forget the YEN is not bearish yet until we see a bullish price action for all Indices, FTSE CAC DAX NIKKE etc…

Overall this would be an ideal target for Yields





Let’s just add up what we said. Weighted average YEN is trapped between support and resistance. Yields, Bonds and Nikkei futures and JXY suggest that we may see further bearish price action on YEN where Indices do not confirm that. If we see FTSE100 DAX and major indices keep rising then yes we see more Yen bearishness and of course stronger USDJPY.




Next I would like to review USD before looking at the USDJPY as the last step.


This is weekly weighted average USD. See how the price is trapped between support and resistance like JPY average!




If I zoom in you can see how the Friday candle is bouncing off the EMAs




We have strong support and strong resistance but see this false breakout too followed by a very bearish candle. I would wait and watch this price action

But we may also have a flag here. See that


We cannot find the answer whether it is going to break support or resistance here. We should look at the other charts.

But before going to other charts see the weekly average

This looks like two flags. Bigger one and smaller one.



Remember that we have been witnessing great data coming out from the US recently.... We may see a big move up... On the chart above it looks it is going to break the topside…
Comment: Let’s just compare YEN and DOLLAR weighted averages.



They are correlated negatively most of the time. If USD breaks higher YEN most likely will break the lows

But how can we say if flag is about to be broken. Let’s review TNX

This is weekly TNX. TNX is USD Yields. As you can see in 2016 it made a false breakout of the lows



Since then we see a wedge formation. Can you see that? It broke the wedge and also it made a false breakout of the 2016 highs.




See where the price is now. Just bounced off the wedge formation..



We have Wedge as support and EMAs as support too. Probably it is heading again into the resistance level one more time. If it is successful we will see a higher high and as USD and TNX correlated positively we will see that USD appreciate too But if it is not successful we will see the right shoulder of an H&S formation and finally we see the price heading lower. So it is really a waiting time on USD.
See the next FIBO level on TNX IF the price is going to head into highs



Next I would like to look at US DOLLAR futures.
While the have a been a lot of discussions on whether we see a dollar bull or bear Dollar futures were just heading higher with no sign of exhaustion. See how it found its support on weekly!



Remember that they have positive correlation.

Next I would like to look at USD Bonds. There is a negative correlation is expected between USD and BONDS. See the price action on Weekly… Look at the last candle !!!



Have not seen this sorts of candle in this market for ages!!!




The lower it goes to more bullish USD going to be

But also see the wedge formation here. It is getting back to the wedge formation. In fact that was probably a false breakout!



Bonds suggest that we will see a bearish bond which means a bullish USD
Comment: Next I would like to review bond futures.
The price has been attempting for the last a few weeks to break thi strong rising trend line and that some stages it was successful.


The lower This market goes the stoner USD we will have. Let me zoom in
See the last weekly candle. Like most of the US markets we have see a sign of reversal. Also see that how it is pulling back from EMAs. But this markets has a difficult job to break these support lines



But if that breaks to the lows that confirms our flag on average chart.

Lets look at USDJPY now:
See the big wedge that formed on the weekly USDJPY.


See how this has not completed the rotation to the highs of the wedge.
Also see where the price is now. At the bottom of the wedge and bouncing off the EMAs. Not that much room to the upside but that is like a good long opportunity. we see here the price spiked EMAs deeply. Also see where weekly candle closed. Inside the wedge.


However I would say still we need to be patient with this pair as on daily the price does not look that attractive. I would like to see a break of the previous highs and then a close above that on daily plus I would like to see a bullish move in all indices before going long this pair again,


Also the monthly price action is not bullish too. All I can see here is that monthly candle for May pulling back from the wedge and EMAs and this is a sign for a bearish market. But see how in one day (Friday) which was the first day of the month we made such a extensive move higher on USDJPY



Bottom line: We should wait for further confirmation on YEN weakness and Dollar strength. Indices are the key factors in this play and we would like to see the bullish price action for Indices to see UJ growing. Otherwise if in the new week we see Indices falling as last week and TNX falling the USDJPY is a bear market. Do not forget that we had a great NFP on Friday
very nice in depth analysis........ :)
a waiting game indeed.
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Thanks for one of the best analysis sir, keep up the good work. All the best.
Reply
@harty10, Thank you. I will mate.
Reply
Constructive analysis. Let's see how the pair plays this week. Will be waiting for a good entry.
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khansalarehsan mrahmanlinks
@mrahmanlinks, Thank you mate...
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