Limited downside for USDJPY

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USDJPY

Although signals are far from strong, the presence of a Demark 9 count on the weekly chart highlights scope for a corrective bounce. Also, we see value (risk/reward) on buying dips this week. Here is the technical picture:

 

USD INDEX

Daily – With the last 5th wave sequence completed at 88.15 (Elliott Wave formation), the long-term bias now swings to the upside. We look for dips to be bought and the 88.15 low to hold.

 

Intraday (four-hours) – We look for price to move lower in a choppy and corrective formation. Resistance seen at 90.45, support at 89.20-88.80 (intraday rallies to be sold, dips bought)

 

USDJPY

Monthly: Possibly forming a bullish reverse Head and Shoulders pattern (a break of 126.00 is needed to confirm). Although USDJPY initially moved higher from the 50% pullback level of 100.57 (from 75.30-125.85), sellers have re-emerged. The selloff would need to stall soon, or we would be looking for lower levels towards 91.57 (AB=CD formation target)

 

Weekly:  Pushed through the 61.8% pullback level last week (from 98.82-118.66). Trend line support is seen at 104.30. DeMark has posted a correction 9 count (9/9). This normally dictates a move to the upside within 4 candles (weeks)

 

Daily – The move lower has been mixed and volatile, common in corrective sequence. An AB=CD formation target is located at 103.40. Demark posts a 6 from 13 (exhaustion count) so scope for further selling at the start of the week (until we reach 13)

 

Daily (2) – We have a 261.8% extension level at 104.54 (from 114.73-110.84). This is close to the previously mentioned trend line support.

 

Intraday (eight-hours) – Forming an Ending Wedge pattern. Trend line support is seen at 104.60. The wedge is given more relevance with the chart highlight bullish divergence (the chart makes a lower low while the oscillator makes a higher low), often a signal of exhausted bearish momentum, or at least a correction higher. On a break of 107.40, the measured move target is 113.37.

 

Summary: Although we have no clear signal of a reversal (as yet), the technical bearish picture is close to exhaustion. Further losses in the USD index also look limited. Buying USDJPY on dips between 104.60 and 103.60 with a stop at 102.60 and a long-term target at 113.00 offers substantial risk/reward this week.

 

 

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