technical analysis USDJPY

Technical analysis of USDJPY

The dollar has made strong gains against the yen so far this week, mirroring gold’s losses as sentiment has flipped back to ‘risk on’ in many markets. This technical analysis of USDJPY looks at the four-hour chart.

The main resistance here is the latest high around ¥105.70, which was also a lower high around the middle of last month. Low support occurs around ¥103.30, but moving averages are likely to be more important than this fairly distant area over the next few days.

Technical indicators on USDJPY H4

 

Moving averages are in the process of rearranging into a buy signal, but at the moment all of the 50, 100 and 200 SMAs are successively below slower ones but also below the price. All three were broken in one period from 12.00 GMT on Monday. The first support from moving averages is the 200 SMA around ¥105.05, while below this the value area between the 100 and 200 SMA might cap a retracement.

While there has been no overbought signal from Bollinger Bands (50, 0, 2) since Monday afternoon GMT, the slow stochastic (15, 5, 5) currently at 74 has only recently emerged from overbought after completing a downward crossover. This strengthens the impression that a retracement should be awaited before new buyers might enter. Meanwhile extremely high buying volume on Monday around the big gains suggests that this could indeed be the start of a reversal of the downtrend.

Price action and Fibonacci

 

Monday’s upward movement with five consecutive periods of gains appears to have been liquidity-based despite the very large candles from 8.00 GMT. Momentum since then has decreased. Since then though the maximum number of consecutive losing periods is three, so ongoing gains seem likely based on price action alone.

The 50% area of the daily Fibonacci fan coincides with the main area of resistance. A breakout from this important zone would probably lead to an uptick in momentum. On the other hand, consolidation around the 50% seems to be more likely over the next few days unless American data this afternoon are surprisingly positive.

Technical analysis of USDJPY: summary

 

Overall the technical picture for dollar-yen suggests more gains to come; it does appear that the downtrend is reversing. A phase of consolidation below the main resistance near ¥105.70 is likely before another upward wave, though. Today’s key economic releases are on American inflation. These data could bring short-term volatility to USDJPY around 13.30 GMT.

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