In this series we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend. The US Dollar has fallen more than 3.5% against the Japanese Yen with price now testing a key technical support zone we’ve been tracking for months now. These are the updated targets and invalidation levels that matter on the USDJPY/USD weekly chart. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
USD/JPY Price Chart – Weekly
Notes: USD/JPY is trading into a critical support zone we’ve been tracking for months now at 107.84-108.43– a region defined by the 61.8% retracement of the 2018 advance and the 2017 low-week close. A break below this key zone is needed to keep the bears in control targeting the 2013 trendline just above the 106-handle. Resistance stands with the objective yearly open at 109.68 backed by the high-week close at 111.54. Ultimately a breach above 112.43/59 would be needed to shift the broader focus back to the topside in USD/JPY.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
Bottom line: USD/JPY is testing BIG support this week and the focus is on a reaction off this mark. Watch the weekly close – above 108.43 would leave the risk for a recovery towards the yearly open. Sub-107.84 risks further losses for the Dollar with such a scenario targeting multi-year slope support. From a trading standpoint, the risk for a near-term recovery here remains but we’ll be looking for a short-entries on a move towards the yearly open- ultimately favoring a downside break of this key zone.
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USD/JPY Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-long USD/JPY – the ratio stands at +2.22 (68.9% of traders are long) – bearish reading
- Traders have remained net-long since May 3rd; price has moved 2.8% lower since then
- Long positions are 1.4% lower than yesterday and 6.8% lower from last week
- Short positions are 3.5% higher than yesterday and 10.6% higher from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/JPY prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/JPY price trend may soon reverse higher despite the fact traders remain net-long.
See how shifts in USD/JPY retail positioning are impacting trend- Learn more about sentiment!
Key US / Japan Data Releases
Previous Weekly Technical Charts
— Written by Michael Boutros, Technical Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex