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Limited downside for USDJPY

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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:



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.

USD Index D.png


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)

USD Index 4.png



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.

USDJPY 8.png


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.



In regards to the PIA analysis, no representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result.

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