Japanese Yen Technical Forecast: USD/JPY, EUR/JPY, GBP/JPY, AUD/JPY


Japanese Yen Technical Forecast: Bearish

  • The Yen got here into the week with a full head of steam, persevering with to realize as US Treasury yields had been falling, thereby creating extra unwind of the carry trade. But, that discovered help on Tuesday round some FOMC commentary and as yields pushed-higher into the tip of the week, USD/JPY staged a powerful restoration.
  • Yen value motion has grow to be extremely depending on actions in Treasury yields of late and the explanation for that’s the carry trade. If treasury yields proceed their ascent, the Yen stays a horny automobile for funding carry; but when yields turn-around resembling we noticed after the July FOMC charge determination, we might see an ‘up the stairs, down the elevator’ sort of dynamic.
  • The analysis contained in article depends on value motion and chart formations. To be taught extra about value motion or chart patterns, take a look at our DailyFX Education part.
  • Quarterly forecasts have simply been launched from DailyFX and I wrote the technical portion of the US Dollar forecast. To get the complete write-up, click on on the hyperlink under.

It was a giant week for the Japanese Yen, and we could have simply seen a tonality change within the currency.

Since hitting a recent 24-year excessive in mid-July, USD/JPY has been pulling again. And what initially appeared like a retracement began to tackle significantly extra velocity as yields fell after the July FOMC charge determination. Despite the Fed’s 75 bp hike, markets had been beginning to price-in the potential of an eventual pause or pivot from the FOMC. And as yields dropped, so did the attractiveness of the carry trade – and if that was a theme that was going to proceed, with yields falling the exit from that bullish pattern in USD/JPY that’s been going for 18 months is just so huge. And that would precipitate extra promoting, which is likely one of the causes that pullbacks from tendencies will be a lot sharper than the pattern itself.

In USD/JPY, costs got here into the week within the midst of a considerably aggressive sell-off. I wrote concerning the matter on Tuesday morning, highlighting the 131.25 stage that was a previous double-top within the pair. That was short-term help which led to a powerful bounce, and that bounce continued by means of Wednesday. On Wednesday, USD/JPY had already arrange for doable bullish breakout potential. Helping the matter alongside was a collection of hawkish feedback from the FOMC, key of which was the Tuesday comment from Mary Daly of the SF Fed that the financial institution was nowhere close to completed with charge hikes.

The Friday NFP report is what lastly pushed USD/JPY back-above the 135.00 deal with, and alongside for the trip was US Yields, surging increased as odds for extra hikes sooner or later continued to get priced-in.

For subsequent week the key focus on the financial calendar is the Wednesday launch of CPI information, anticipated to come back in at 8.7% after final month’s 9.1%. Perhaps the larger variable in my view is what weighed closely on the matter final week, and that’s Fed-speak from FOMC members. Last week that appeared nearly uniformly-hawkish, which is uncommon, but it surely undoubtedly appeared just like the financial institution wished to ship a message of some type. I’m on the lookout for that to proceed into subsequent week.


Given the matter at hand, USD/JPY stays of curiosity for each yield and Yen-themes. After all, if we’re seeing increased yields getting priced-in to the equation we’re possible going to be seeing some component of USD-strength to go together with Yen-weakness. The level of problem in USD/JPY is the scale of the transfer already, with value having jumped by nearly 500 pips this week after that Tuesday reversal.

There was a short-term inverse head and shoulders sample in USD/JPY. That cleared on the Friday breakout and costs pushed above the psychological stage at 135. A pullback to help round prior resistance can preserve the door open for bullish continuation. The prior neckline of the inverse head and shoulders sample is round 134.60, in order that turns into a focal point. And there’s a Fibonacci stage that’ s a bit deeper, round 133.55 that would stay as an ‘s2’ level of help.

On the resistance facet of the coin, there’s a Fibonacci retracement round prior support-turned-resistance at 135.83, after which a value motion swing exhibits up at 137.35.

USD/JPY Four-Hour Price Chart

Chart ready by James Stanley; USD/JPY on Tradingview


For these which can be bullish JPY, or for people who suppose inflation has already-topped, EUR/JPY will be of curiosity. The Euro doesn’t appear to have many robust basic arguments in the mean time and, certain, that may change, however there’s no signal of that but.

Instead, EUR/JPY has been pushed by related Yen-themes with a tinge of added bearishness introduced in by the one currency. The pair set a recent two-month-low on Tuesday morning as a case-in-point, and as yields have risen EUR/JPY has put in a large bounce, leaping by greater than 425 pips from the earlier-week low, as of this writing.

From the latest pullback taken from the June excessive all the way down to the Monday low, there’s a collection of ranges from an utilized Fibonacci retracement that appear to have some confluence. The 140 psychological stage aligns with the 61.8% retracement of that transfer and there’s been fairly a little bit of value motion at that spot when EUR/JPY was turning. If bulls can efficiently mount help back-above that value, bearish eventualities gained’t look very enticing. But, earlier than that comes into play is one other spot of curiosity, round 138.84, which traces up with a couple of swings on the weekly chart under.

EUR/JPY Daily Chart

eurjpy daily chart

Chart ready by James Stanley; EUR/JPY on Tradingview


GBP/JPY has been within the midst of a fairly wide selection for the previous few months, with a lot of the motion holding inside of fifty and 61.8% Fibonacci retracements from the 2015-2016 main transfer. I checked out this on Wednesday simply after a help inflection on the 50% marker which ended up bringing an nearly 400 pip bounce into the BoE charge determination on Thursday morning.

GBP/JPY Monthly Chart

gbpjpy monthly chart

Chart ready by James Stanley; GBP/JPY on Tradingview

GBP/JPY Shorter-Term

Getting nearer on the GBP/JPY highlights some fairly appreciable chop within that longer-term vary. This might make for a tough setting to arrange tendencies. There is some extent of reference, nonetheless across the 163.90 stage, a break of which might open the door for breakout potential into the 165 psychological stage. Beyond that, a previous double-top sits at 166.25 that continues to be of curiosity.

On the underside of value motion, I’m attaching the 159.46 Fibonacci stage to the 160.00 psychological stage to create a zone. Before that comes into play, the 161 stage presents some help potential as that helped to type each day lows for 4 of the previous 5 buying and selling days.

GBP/JPY Daily Price Chart

gbpjpy daily chart

Chart ready by James Stanley; GBP/JPY on Tradingview


AUD/JPY stays within the confines of a symmetrical triangle sample. Similar to the sell-offs that had proven in lots of the Yen-pairs above, AUD/JPY put in a precipitous drop that held by means of this week’s open. AUD/JPY examined under the 92 deal with which had proven a latest penchant for help. The pair caught some additional velocity in that move-lower after the RBA charge determination on Tuesday morning, serving to to type a recent two-month-low.

But, as that Yen reversal started to push together with a return of Yen-weakness, AUD/JPY jumped, and going into subsequent week there could possibly be some short-term bullish potential. Now, it’s value mentioning that the pair continues to be in consolidation, as evidenced by the triangle on the weekly under.

AUD/JPY Weekly Chart

audjpy weekly chart

Chart ready by James Stanley; AUD/JPY on Tradingview

AUD/JPY Shorter-Term

The 93.88 stage seems to have some significance right here as there’s been a lot of inflections at that value; and most lately, the pair turned-around earlier than a check there on Thursday after it had helped to set help on the Monday prior. A break above that stage opens the door for a re-test of the 95.00 psychological stage. Above that’s trendline/triangle resistance, which is simply within a previous double-top at 95.76. Each of these value ranges presents some potential for subsequent resistance ranges on bullish follow-through within the pair.

AUD/JPY Daily Chart

AUDJPY daily chart

Chart ready by James Stanley; AUD/JPY on Tradingview

— Written by James Stanley, Senior Strategist for DailyFX.com

Contact and comply with James on Twitter: @JStanleyFX

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