technical analysis USD-JPY

Technical analysis of USD-JPY

There’s been a degree of indecision on the four-hour chart of dollar-yen (USDJPY) so far this week. Click on the image to magnify. After large losses last week, price has not tested any new lows since yesterday’s open in Tokyo. Today’s technical analysis of USDJPY from Exness Education considers some of the areas that could be key this week.

The most important high resistance on this chart is likely to be the high from February of ¥112.25. A number of key areas will be in view though before this sort of distant price comes back into focus. Low support could be October 2019’s lows around ¥106.50, while lows from the past week of about ¥107.50 are likely to be important supports this week as well.

Technical indicators on USD-JPY H4

 

The biggest change so far this week signalled by indicators is emergence from oversold. Price has closed five successive times within the lower deviation of Bollinger Bands (50, 0, 2) before the current period. The slow stochastic (15, 5, 5) has also completed an upward crossover from oversold. This would suggest consolidation and possibly a bounce over the next few periods.

Moving averages are somewhat unclear on this timeframe. None of the 50, 100 and 200 SMAs are fast enough to react quickly to sudden movements like what happened last week. The 50 SMA from Bands seems to be about to death cross the 100, though. The first important resistance from MAs could be around ¥109.70, the area of the 200 SMA.

Price action and Fibonacci

 

Recent price action seems to confirm the picture of consolidation and indecision. Three upward candles at yesterday’s opening weren’t followed by any sustained gains. Equally, the downward engulfing candle that followed didn’t presage more actual losses.

It appears that the 23.6% Fibonacci retracement area could be important this week given that price has tested it twice and failed to break through. The 50% Fibo area will also probably be important because it overlaps with the value area between the 100 and 200 SMAs.

This week’s key data

 

Without a doubt, the most important data this week are the USA’s non-farm payrolls. The consensus at the time of writing is 175,000 against last month’s 225,000. In addition to the NFP itself, various other American employment data come out at 13.30 GMT on Friday, as does the USA’s balance of trade. These releases have the potential to alter the technical picture completely if they’re notably different from expectations.

Looking somewhat further ahead, CME’s FedWatch Tool now indicates a 100% probability of a cut to 1-1.25% for the Fed’s funds rate on 18 March.

technical analysis USD-JPY

This outlook appears to have been priced in to the dollar over only the past week or so; click on the image to enlarge and view the table at the bottom. This means that expectations for rates and especially changes to these are likely to be critically important for the fundamentals of USDJPY over the next couple of weeks.

Technical analysis USD-JPY: summary

 

On the whole, a degree of ongoing retracement upward seems to be favourable for dollar-yen this week. A successful break to the upside from the 23.6% Fibonacci retracement area would mean greater scope for gains over the next few days.

Conversely, fundamentals are key for USDJPY this week. The NFP’s the most important release, but news of the coronavirus’ spread outside China and the consensus on the Fed’s likely action later this month could also invalidate the current technical outlook.

If you’ve never traded before around key data or during high volatility, Exness Education strongly recommends that you practise first on a demo account. This type of account can be very helpful for new traders because it allows you to test your strategy without the possibility of losing real funds.

OPEN A DEMO ACCOUNT

Disclaimer: the publication of analysis is a marketing communication and does not constitute investment advice or research. Its content represents the general views of our experts and does not consider individual readers’ personal circumstances, investment experience or current financial situation. Analysis is not prepared in accordance with legal requirements promoting independent investment research and Exness is not subject to any prohibition on dealing before the release of analysis. Readers should consider the possibility that they might incur losses. Exness is not liable for any losses incurred due to the use of analysis.