USDJPY Rising Wedge Pattern
The dollar-yen failed to sustain at higher levels and subsequently witnessed a sharp reversal from multi-week tops amid a drastic turnaround in risk sentiment as the Asian indices pared gains. At the time of writing the USDJPY pair is seen around 105.70, having pull-backed from a dip to 105.43 in the last hour, recording a +0.30% gain so far this session. Focus now remains on the overall risk sentiment as we progress towards the European session, while the sharp retreat can be also justified by a fresh profit-taking spree, after the major hit a three-week high. USDJPY is in a rising wedge pattern which signals us that bulls are running out of strength,i am looking for sell after downside breakout with 0.382 and 0.618 fibo as possible take profits (Forex Daily-Analysis).
USDJPY Forex Daily-Analysis
USD is rallying strongly and is quickly approaching the major 106.00 resistance. A break above this level would shift the focus to 106.80 even though this level is likely out of reach for now. The anticipated USD strength has been more rapid and certainly move impulsive than expected. A break above 106.00 would shift the focus to 106.80, the high seen on the day of Brexit. In other words, there is no change our bullish USD view but the stop-loss is adjusted higher to 104.00 from 102.40 (104.80 is already a strong short-term support).
USDJPY Bigger Bottom Possible
Better Chinese data helped fuel a move in USDJPY today extending the rally through the 106.00 level as the pair put in one of its best one week performances in 17 years. The beats in Chinese GDP, Retail Sales and Industrial Production all helped to stoke a major move in Asian session trade that topped out at the 106.30 level before running into some profit taking. Chinese GDP rose 6.7% versus 6.6% IP climbed to 6.0% from 5.9% and Retail Sales soared back above double digits to 10.6% from 9.8% projected. Although the news was a clear relief to the market that was concerned about Chinese growth, critics pointed out that much of the improvement was driven through expansion of credit as new Yuan loans exploded to 1308B from 990B forecast. Thi is indeed a troubling sign for the future, but for now it assuages fears that China was slowly tipping into contraction and helped support the moves in all the risk pairs with Aussie rising to 7670 as it now eyes the key 7700 level.
USDJPY Short Strong Bullish
The USDJPY pair broke higher during the course of the day on Thursday, finally getting above the 105 level. This is an area that has been resistive in the past, and the fact that we can break above there again is an encouraging sign. However, I believe that waiting until we can break above the top of the range for the day on Thursday to start going long is probably prudent as there should be a lot of noise above. I am not looking for a straight shot higher, but realize that fear of the Bank of Japan has taken over the markets, as there is the possibility of stimulus or even worse, currency intervention if we fall too far (Forex Daily-Analysis).
Possible Impulse Wave Count
These expectations are likely to support the USDJPY lower bound at around 104.00. However, even as USDJPY has been rising, details about policies to stimulate and enhance Japan’s growth momentum have been scarce. USDJPY may top out at between the 106.00 and 107.00 levels. Japanese exporters could also limit the upper bound for USDJPY close to month’s end by selling USDJPY. Prime Minister Abe met with ex-Fed Chair Ben Bernanke this week for advice on ending deflation. We do not expect any helicopter money, as past experience shows that sizeable fiscal stimulus and monetary expansion are unlikely to boost Japan’s growth potential. Any comments by policymakers may further stress the markets, but are unlikely to affect the direction of USDJPY ahead of the July 28th-29th meeting (Forex Daily-Analysis).
Fast-forwarding to Friday’s Asian session, the UK unit is rising alongside regional share prices and the sentiment-geared Australian Dollar while the anti-risk Japanese Yen declines. As noted yesterday, easing can be seen as supportive GBP-denominated assets if it aids UK financial stability in a post-Brexit world.