USD/JPY Fails to Take Out Recent Highs, Reverses
Joe Perry October 1, 2019 9:19 PM
With the release of the ISM Manufacturing data earlier today, the markets were in risk off mode. As we discussed earlier, the ISM data was much weaker than expected, and the US Dollar sold off immediately. DXY sold off 50 pips and the SPX500 closed down nearly 1.5%. USD/JPY was another victim of today’s ISM data, down 30 pips on the day, after being up almost 75 pips before the data.
Source: Tradingview, FOREX.com
There is a substantial amount of bearishness on the daily chart. Not only did the pair put in a double top at 108.46, but it also failed to take out previous support (which now acts as resistance) at the same level. That level also is the 50% retracement from the highs on April 24th to the lows on August 23rd. By putting in a double top, it also created divergence with the RSI, which is further concern that prices may move lower. The daily candle today is a bearish engulfing candle, in which the body fully engulfs the previous days candlestick. It had a false breakout above the descending trendline, which extends back to May 1st.
Source: Tradingview, FOREX.com
On a 240-minute chart, we can see that USD/JPY broke lower out of a short-term channel. Support comes at the 38.2% Fib retracement level from the August 26th lows to the Sept 18th highs (which are the same as today’s highs) AT 106.92. Next level of horizontal support is near 106.68. Below that level, there is room to head all the way back to 104.44. Resistance now is back at the rising trendline near 108.12. Above that, resistance comes in at the previous double top of 108.46. If price manages to get above there, the next level of resistance is the prior high near 109.37 from August 1st. (This also happens to be the 61.8% retracement level from the previously mentioned timeframes on the daily chart)
As i mentioned earlier today, (and I’m sure we’ll be mentioning for the next few days) all eyes will be on the ADP Employment data tomorrow and the Non-Farm Employment data on Friday. These could be the next catalysts to drive the direction of the US Dollar.
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.