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USDJPY Forex Analysis Today

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USDJPY Approaching Brexit Highs

The dollar-yen pair picked-up significant strength over the last hour after a brief period of consolidation near 106.10 levels, largely on the back of resurgence of risk friendly environment as the European equities inch higher. The overall trend is very bearish on this pair and we may be in a set up to short again. The high formed during Brexit day @ 1.06.818 is currently trying to be tested coupled with a fibonacci 61.8 ratio and the bottom of the Kumo cloud. This may have presented us with a C point on the way to a ABCD formation (USDJPY Forex Analysis Today).

USDJPY Forex Analysis Today 1

USDJPY Bearish Harami And Dropping

The USDJPY pair bullish momentum seems to have gained fresh traction, boosting the pair to a fresh 4-week high level. The pair rose to 106.70 before retracing few pips to currently trade around 106.55-60 band. During early Asian session the pair dipped below 106.00 handle amid mixed risk sentiment that has a minor impact on Asian equity markets. However, buoyant European equity markets trigger a fresh bout of risk-on trade lifting the pair closer to pre-Brexit high level (USDJPY Forex Analysis Today).

USDJPY Forex Analysis Today 2

USDJPY Forex Analysis Today

The bid tone around the US dollar keeps growing bigger post-European open, now pushing the USDJPY pair towards fresh four-month highs reached at 106.53 a day before. In terms of technicals , the immediate resistance is located at 106.53 (Multi-week highs). A break above the last, the major could test 106.85 (post-Brexit high). While to the downside, the immediate support is seen at 105.71 (5-DMA) and below that at 105.43 (50-DMA).

USDJPY Forex Analysis Today

USDJPY Short Selling At Green

Last week’s rally above res at 103.40 (now sup) signals erratic rise from June’s 29-month trough at 99.00 to retrace Medium term downtrend has resumed and yesterday’s breach of last Friday’s 106.32 high to 106.53 suggests choppy trading with upside bias remains. Above 106.53 would extend gain to 107.00/10 but price should falter below 107.84 (pre-Brexit high) today. On the downside, below 104.64 would indicate a temporary top has been made and bring retracement towards 103.91 before rebound occurs (USDJPY Forex Analysis Today).

USDJPY Forex Analysis Today 4

USDJPY The Expected Sequence

Another attempt at the resistance level of 106.30 could see a break, “but we have to keep in mind that this band of resistance stretches further still, up to 106.64. Therefore I would not be looking for another short at 106.30 but I would at 106.64. The USD is strong right now but this is a key zone of resistance.” There has been no change, this area remains resistant although the price has managed to get up to about 106.50. However the force of the upwards move is slowing down. A convincing reversal in this zone near 106.64 could see the start of a downwards move of several hundred pips. Conversely a break up above 106.64 that is sustained would be a very bullish sign, signalling that the long-term downwards trend has probably come to an end.

USDJPY Forex Analysis Today 5

The latest leg higher in the USDJPY pair is justified by a couple of intrinsics, with the primary driver being the yield spread between the US 10-year treasury yields and 10-year JGBs favoring the greenback. While persistent risk-on moods in the markets, as indicated by falling VIX (CBOE volatility index), weighed down on the safe-haven yen and therefore, boosted the rally in USDJPY. The CBOE Volatility Index (VIX) drops almost 3% to trade at eleven-month lows of 11.59.

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Andrew Pial

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