USDJPY and EURUSD Technical Analysis

Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 1.1280 and 1.1234.

The USD/JPY pair fell initially during the day on Wednesday, as the 105 level of course continues offer quite a bit of resistance.

The Euro continues to wait for new direction cues as prices tread water in a now-familiar range above the 1.10 figure against the US Dollar.

Near-term support is at 1.1018, the 50% Fibonacci expansion, with a break below that on a daily closing basis opening the door for a descent to the 1.0876-1.0912 area (61.8% level, June 24 low). Alternatively, a turn above the 38.2% Fib at 1.1159 paves the way for a retest of trend line support-turned-resistance at 1.1234.

Positioning is inconclusive at this point. The dominant trend continues to appear bearish but follow-through is lackluster and prices are too close to support to justify entering short from a risk/reward perspective. Opting for the sidelines seems prudent until something more actionable presents itself.

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Since the day after the Brexit vote, EUR/USD has been trading in a fairly tight trading range on low volume. In fact, the highest high to the lowest low for the past 20 trading days is the tightest range seen in EUR/USD since August 2014.
Beginning June 24 to today, the highest high is 1.1185 and the lowest low price is 1.0951. Therefore, if price pushes down to 1.0900-1.0951, we could see some volatility kick up as traders jockey for bullish support versus a bearish break.

All of this points towards a market condition geared towards range bound strategies in EUR/USD until we see a break of the post Brexit range of 1.0951 – 1.1185. Even still, a break of this range doesn’t necessarily negate the potential for range bound conditions.


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I have very little confidence that 1.1186 will hold as the price has been coiled just underneath it for too long. I think the price will reach at least the round number of 1.1200 or a level just barely underneath it soon before possibly continuing or falling.

W1 price is broke S3 Pivot to below for the bearish breakdown to be continuing. The price is testing 98.97 support level together with symmetric triangle pattern to below for the bearish continuation, otherwise - ranging bearish.

• There are limits to what BOJ can do in the sense it cannot underwrite debt due to legal constraints
• Don't share view that monetary policy is reaching its limits
• Even within current framework there is ample room for further easing
• First issue to analyze is what factors have hampered achievement of price target
• What we should bear in mind when conducting monetary policy is not its limit but comparison between its benefits and costs
• Negative rates have had impact on mkt liquidity, banks' profits, so need to assess this policy
• Given we have been implementing large-scale monetary easing, any additional easing entails costs
• We should not hesitate to go ahead with monetary easing as long as it's necessary for Japan's economy as a whole
• A reduction in level of monetary policy accommodation will not be considered in comprehensive review
• Balance between benefits and costs of monetary easing can change depending on situation
• Monetary policy should be conducted in a flexible manner
• Comprehensive review is conducted with aim of achieving 2 pct price target at earliest possible time
• There maybe a situation where drastic measures are warranted even though they could entail costs
• BOJ should always prepare policy options to address situations where drastic measures are warranted
• Corporate profits are expected to decrease slightly this fiscal year but remain high
• BOJ's September comprehensive review won't lead to discussions that could lead to tapering of monetary easing
• Employment and incomes have improved significantly
• Japan is no longer in deflation
• Negative rate policy so far seems to have succeeded in lowering funding costs of firms, households
• It is unquestionable that BOJ's QQE with negative rates have contributed significantly to turnaround in economy
• Japan not in situation where financial intermediary functions are impaired from negative rate policy
• Potential impact on financial intermediation, banks' profits needs to be taken into account in assessing effectiveness of negative rates
• Impact of negative rates on financial intermediation can vary depending on duration of this policy
• Substantial oil price declines, weakness in private consumption and slowdown in emerging economies had negative impact on achieving price target
• For the time being observed inflation is unlikely to accelrate

the source

On Monday, the Chinese Renminbi (off-short Yuan) fell by its largest amount in four months after China opened following National Day Golden Week holiday. The drop amounted to 0.46% for the Yuan but continues to validate the trend of a stronger USD and weaker CNH. The weakening took the Yuan to its lowest level (6.7501) since September 2010 according to Bloomberg data.

The weakening aligns with China FX reserves shows a rising amount of capital is leaving. The increase in capital flows could bring volatility to global markets as the world awaits the next move by the Federal Reserve that could bring down the Yuan and is encouraging wealthy citizens of China to move their money overseas in yuan amid Yuan depreciation expectations.
So why all this talk about the CNY weakness? In short, the Yuan weakness gives China a comparative and possibly absolute manufacturing and export advantage that could encourage the aggressive fiscal policy stimulus that would naturally align with the “yield curve control’ announced on September 21.

Some traders have looked at the move in USD/JPY post-Brexit as a triangle. That’s a valid view, but a break above 104.32 (September Opening Range High) that would invalidate such a pattern and could add to the building evidence of a pending bullish breakout. A break above 104.32 would then turn Bullish focus to the post-Brexit high of 107.48.

Opening Range reversals are commonplace in strong trends and should be indicative of trend continuation. In the case of October, we’d have an opening range reversal if the price of USD/JPY broke below 101.17 (Monday’s low) in the second week of October and continued lower. However, a break above the high of 104.15 on a closing basis would further embolden USD/JPY bulls. Given the significant macro-event risk of the US Presidential Election, the opening range low of 101.17 should remain on watch as an invalidation of the recent excitement.

A continuation through the resistance levels mentioned above could see traders start to push the market higher in fear of missing out on the next USD/JPY long trade.

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The Japanese Yen has halted its decline against the USD as 2016 comes to a close. However, since September 21, when the Bank of Japan announced the significance Yield Curve Control policy or YCC, USD/JPY has now risen by as much as ~19.35% and could continue higher into 2017 given a recent message from Japan’s Chief Cabinet Secretary Yoshihide Suga in a Nikkei News Interview.

The interview from Shinzo Abe’s ‘right-hand’ turned focus on the FX market as one the most critical crisis managements for his post as Chief Cabinet Secretaryis the FX market. Specifically, his focus was on creating a stable financial and economic environment for Japanese corporations so they could borrow and grow within a stable environment.

However, it’s fair to say that the near 16% JPY weakness fails to provide stability sought by Japan’s government. Much of the move in USD/JPY has been on the November Trump victory, which is playing out in financial markets similar to the December 16, 2012, Japan election that gave Shinzo Abe’s Liberal Democratic Party in addition to the hawkish rhetoric from the Federal Reserve on December 14.

The Technical Picture has not changed for USD/JPY as the uptrend looks ready to resume its uptrend at the start of 2017. The zone of support worth watching in this strong uptrend is the December 19 low of 116.56 and the August 24, 2015, low of 116.08. This zone also encompasses a Trendline drawn from higher lows that began with the 111.35 low on November 28.

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EUR/USD
Weekly

EUR/USD continues to trade on a long term parallel and the weekly wicks (key reversal this week) denote active support. I don’t like being a bear in the face of active support at a well-defined parallel…
As always, define your risk points (read more about traits of successful traders here).

GBP/USD
Weekly

GBP/USD needs to take out the December high in order to suggest anything meaningful on the upside. Until then, it’s sideways at best. Don’t forget about the 96 month (8 year) cycle low count. Pay attention to the following levels; the former floor in the 1.3500-1.3700 zone and the line that extends off of the 1992 and 1998 highs (hits the 2009 low) near 1.1000.

AUD/USD
Weekly

"AUD/USD sports good looking symmetry with respect to the time between major lows. It’s one reason that I like the idea of the 2016 low at .6847 holding. The other reason to get bullish in the event of constructive price action on the daily or weekly charts is the relationship between the 2011 high and 2016 low. The .618 absolute retracement of the 2011 high at 1.1080 is .6847 (1.1080 x .618). The 2016 low is .6827."
Over the next few weeks, watch .7000 (maybe just above) for support. Strength through .7535 would be viewed in a bullish light.

NZD/USD
Weekly

"NZD/USD is vulnerable to say the least. The 1985-1993 trendline was resistance in Kiwi from July to November. In fact, price action since July just completed a head and shoulders top. Throw in the fact that 2 of the last 6 weeks are of the outside bearish variety the Bird looks like it’s in for a world of hurt. Also, the entire rally from August 2015 qualifies as a re-test of the long term bear move that began with the double top confirmation in early 2015. The re-test, head and shoulders, and rally from 2015 as a wedge is so textbook it scares me."

USD/JPY
Weekly

"USD/JPY may be at or near the end of the first leg of the next bull cycle just as October 1990 was the first leg of the next bear cycle. This sentiment remains although it’s tough to have faith after Friday’s jam session. The first week of the year ends as a doji. The trendline and well-defined horizontal level (2015 support) indicate potential for a bearish outcome but don’t be stubborn on a breakout. The next level of interest wouldn’t be until roughly 121.00."

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