USDJPY and EURUSD Technical Analysis

Talking Points

• Strategy: Short, Stop: 1.2500 (Close), Target: 1.2270
• Struggles Below Key Level With Candlestick Signals Lacking
• Shooting Star Signaled An Early Warning For A Retreat

EUR/USD’s consolidation between the 1.2360 and 1.2500 trading band continues, with clear cues from candlesticks lacking. Yet in the context of a medium-term downtrend the pair may be set to revisit the recent lows near 1.2360. Beneath which would put the August 2012 trough at 1.2250 in sight. A close above 1.2500 would be required to negate a short-term bearish technical bias.

Consolidation Endures Amid Void Of Candlestick Patterns



The four hour chart reveals a Shooting Star formation near the 1.2490/1.2500 ceiling. The key reversal pattern flashed an early warning of an intraday retreat, and turns the focus on the range-bottom to 1.2365.

Shooting Star Flashed Early Warning Of An Intraday Retreat



By David de Ferranti, Currency Analyst, DailyFX


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Talking Points:

• USD/JPY Technical Strategy: Flat
• Support: 116.30, 115.37, 113.85
• Resistance: 117.82, 119.05, 120.27

The US Dollar may be vulnerable to a correction downward against the Japanese Yen as negative RSI divergence points to fading upward momentum. Near-term support is at 116.30, the 23.6% Fibonacci expansion, with a break below that on a daily closing basis exposing the 14.6% level at 115.37. Alternatively, a push above the 38.2% Fib at 117.82 opens the door for a test of the 50% expansion at 119.05.

The mere presence of RSI divergence is insufficient to identify reversal without added confirmation. As such, we will continue to stand aside for now and wait for a more compelling setup to present itself before committing to a position.



--- Written by Ilya Spivak, Currency Strategist for DailyFX.com



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- Japanese Yen at critical price levels versus US Dollar, next move key
- Focus shifts to FOMC Minutes and Fed policy as correlations to yields surge
- Clearly one-sided sentiment leaves us focused on USDJPY gains, JPY declines

The US Dollar continues to surge versus the downtrodden Japanese Yen. What could determine whether the USDJPY breaks even higher?

Source: FXCM

Strong Correlations to US Treasury Yields Keep the US FOMC Minutes, Fed Policy in Focus



Our Retail FX Data Sample Shows Short Interest in USDJPY Hits Record, Favors Gains



Forex Correlations Summary

View forex correlations to the S&P 500, S&P Volatility Index (VIX), Crude Oil Futures prices, US Treasury Yields, and Spot Gold prices.



--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com David specializes in automated trading strategies.

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Talking Points

• Strategy: Flat, Pending Long On Bullish Signal Near 115.90
• Dojis Indicated Reluctance From The Bulls Near 117.90
• Intraday Trade Reveals Reluctance From Traders

USD/JPY has slipped below the 117.90 support level after a string of Dojis suggested hesitation from traders to lead the pair higher. While key reversal patterns are lacking the next level of buying interest rests at the 115.90 mark - suggesting some scope for a shallow pullback. The emergence of a bullish signal at the barrier would be seen as an opportunity to re-initiate longs.

Dojis Suggest Bulls Running Low On Fuel



The four hour chart tells a similar story to the daily with a snaking series of short-body candles suggesting caution in intraday trade. An absence of clearer cues from candlesticks leaves a more constructive setup desired before re-initiating longs.
String of Short-Body Candles and Dojis Endures



By David de Ferranti, Currency Analyst, DailyFX


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Talking Points

• Strategy: Flat, Pending Long On Daily Close Above 119.00
• Dojis Indicated Reluctance From The Bears Near 117.40
• Intraday Chart Reveals Absence Of Key Reversal Patterns

USD/JPY has managed to regain some upward momentum after a string of Dojis suggested reluctance from the bears to lead the pair lower. With key reversal patterns lacking the prospect of a pullback is questionable. Amid a core uptrend a break of the nearby 119.00 ceiling may herald a push towards the next definitive resistance level at 119.80.

USD/JPY: Awaiting Breakout Amid Absence Of Bearish Signals



The four hour chart tells a similar story to the daily with an absence of key reversal signals near the 119.00 barrier. Yet the proximity of the pair to the key barrier suggests awaiting a breakout may offer a more attractive opportunity.

USD/JPY: Key Reversal Patterns Lacking Near 119.00 Barrier




By David de Ferranti, Currency Analyst, DailyFX


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Talking Points

• Strategy: Long (From: 119.20), Stop: 119.00 (Daily Close), Target 1: 119.80, Target 2: 124.10
• Breakout Amid Absence Of Reversal Signals Opens Further Gains
• Intraday Chart Reveals Some Caution From The Bulls

USD/JPY has closed above the 119.00 handle with key reversal candlesticks lacking. Amid a core uptrend this may open the prospect of further gains. An initial upside target is offered by the nearby August 2007 high at 119.80, with an additional target in the distance at the June ’07 high near 124.10.

Awaiting Breakout Amid Absence Of Bearish Signals



The four hour chart reveals some caution from the bulls following the push above 119.00. This is made evident by a string of short body candles and a Doji formation. Yet with key reversal patterns absent the prospect of an intraday retreat is questionable.

Key Reversal Patterns Lacking Following Push Past 119.00 Barrier



By David de Ferranti, Currency Analyst, DailyFX


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Talking Points:

• USD/JPY Technical Strategy: Flat
• Support: 117.98, 115.55, 114.13
• Resistance: 119.48, 121.91, 123.88

The US Dollar paused to digest below the 120.00 figure after posting the largest daily advance in seven weeks against the Japanese Yen. Near-term resistance is at 119.48, the 23.6% Fibonacci expansion, with a break above that on a daily closing basis exposing the 38.2% level at 121.91. Alternatively, a turn below the 14.6% Fib at 117.98 opens the door for a challenge of the December 16 low at 115.55.
Risk/reward considerations argue against entering long with prices in close proximity to resistance. On the other hand, the absence of a defined bearish reversal signal suggests taking up the short side is premature. We will remain flat for now, waiting for a more actionable opportunity to present itself.




--- Written by Ilya Spivak, Currency Strategist for DailyFX.com



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Talking Points:

• USD/JPY Technical Strategy: Flat
• Support: 117.91, 115.48, 113.51
• Resistance: 120.82, 121.91, 123.88

The US Dollar advanced against the Japanese Yen as expected after putting in a Bullish Engulfing candlestick pattern. A daily close above the December 23 high at 120.82 exposes the 38.2% Fibonacci expansion at 121.91. Alternatively, a turn below the 23.6% Fib retracement at 117.91 clears the way for a challenge of the 38.2% threshold at 115.48.
While entering long seems compelling from a purely technical perspective, we will tactically opt to stand aside. The possibility of a surprise outcome on the upcoming ECB monetary policy announcement represents significant risk aversion risk ahead. Haven flows are likely to boost the Yen in such a scenario, overturning bullish chart positioning. With that in mind, we will remain flat.



--- Written by Ilya Spivak, Currency Strategist for DailyFX.com



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Talking Points:

• USD/JPY Technical Strategy: Flat
• Support: 117.91, 115.48, 113.51
• Resistance: 119.48, 120.82, 121.91

The US Dollar is consolidating gains against the Japanese Yen having advanced as expected after forming a Bullish Engulfing candlestick pattern. Near-term resistance is at 119.48, the 23.6%Fibonacci expansion, with a break above that on a daily closing basis exposing the December 23 high at 120.82. Alternatively, a reversal below the 23.6% Fib retracement at 117.91 opens the door for a test of the 38.2% threshold at 115.48.

Positioning is inconclusive at this point, with prices offering no clear-cut and actionable signal to initiate a long or short trade. We will continue to remain on the sidelines for the time being, waiting for a compelling opportunity to present itself.



--- Written by Ilya Spivak, Currency Strategist for DailyFX.com



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Talking Points

• USD/JPY holds above key moving average
• GBP/USD rebounds sharply from multi-year lows
• EUR/USD intraday volatility continues

USD/JPY

• USD/JPY traded at its lowest level in three weeks yesterday before finding support around the 50-day moving average in the 119.30 area
• Our near-term trend bias is positive while above 119.30
• A move through 121.00 is needed to re-instill upside momentum in the exchange rate
• A minor turn window is seen here
• A close below 119.30 would turn us negative on USD/JPY

USD/JPY Strategy: Like the long side while above 120.00 (close).

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/JPY	120.30	120.50	120.55	121.00	122.00

GBP/USD

• GBP/USD touched its lowest level in over four and a half years on Wednesday before rebounding five big figures
• Our near-term trend bias is now higher in Cable while above 1.4720
• Traction over 1.5050 is needed to set off a new leg higher in the rate
• A very minor turn window is seen early next week
• A close below 1.4720 would turn us negative on the pound again

GBP/USD Strategy: Square

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
GBP/USD	1.4720	1.4800	1.4910	1.5050	1.5140

EUR/USD


The question on everybody’s mind after yesterday’s Fed inspired squeeze on USD long positons is whether that was it and the dollar can now resume higher or does the correction have more room to run? Judging by the action this morning it seems the market is scared of missing out on the next leg higher in the Greenbck as several pairs have already returned to pre-FOMC levels. Only time will tell whether this is the case, though it would be unusual to not see at least a period of minor consolidation first after such extreme volatility. In the euro, the 1.0550 area looks key with traction under this zone needed to confirm that a downside resumption is indeed underway. A move back over 1.0920 would warn that the correction has more room to run.

--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com


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