USD/JPY: another day another (weaker) dollar
Fawad Razaqzada March 23, 2017 1:03 PM
At the time of this writing the US dollar was a touch firmer against the likes of the euro and the Aussie, but lower versus the pound and yen, leaving the Dollar Index basically flat, but below that critical 100 level. So far, there are no signs of a comeback for the greenback. It sure wasn’t helped by the fact that unemployment claims showed a surprise increase last week. Apart from a few Fed speakers, there isn’t any significant US data scheduled for the remainder of this or next week to change the dollar’s current trend. So, the US currency may drift further lower. Any potential bounces should be taken with a pinch of salt, unless there is a clear break in the downtrend structure.
The dollar’s relentless selling saw the USD/JPY finally break below key support around 111.55/75 at the start of this week. It has since held below this area, which suggests further technical follow-up selling could be on the way. The sell-off has paused for breath around 110.75-111.15, an area which was previously support and resistance and ties in with the 38.2% Fibonacci retracement level against the low from last year. But if the USD/JPY were to break below this support region, which is our base case scenario, then the next stop could be around the 108-109 area. This is where the support trend of the bearish channel meets the 50% retracement level and the 200-day moving average. In addition, the point D of an AB=CD price move completes there. Thus, as a minimum, we should expect to see a bounce if the USD/JPY were to get there. But there’s an even stronger level of support further lower around 1.0650/80 area, as this was the last resistance prior to the breakout and it also ties in with the 61.8% Fibonacci retracement level. It is here where it is more likely that may see a bottom on the USD/JPY, though there is also a good chance for this to happen around the 200-day average.
But it is far too early to say anything technically bullish about the USD/JPY with a high degree of confidence, even if we remain fundamentally bullish on this par. Thus, for now, the bulls appear to be losing control of the trend. However, if they somehow manage to push the USD/JPY back above the broken support at 111.55/70 area then that could lead to a short-covering bounce, possibly towards the top of the bearish channel. The long-term bullish trend would only be re-established in the event the USD/JPY breaks out of the bearish channel to the upside.
Source: eSignal and FOREX.com.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.