Ichimoku Still Favours USD/JPY Sales, But Watch Nikkei 225

USD/JPY Weekly Chart

Yen found committed buyers at the weekly kijun intersection, allowing for a recovery back above the 101.50 after an intraday double bottom. The run higher has the characteristics of corrective in nature though.

USD/JPY Daily Chart

Following a breakout of the kumo cloud, first time since early Nov 2013, a corrective move is slowly taking the exchange rate towards 'value area' 101.80/102.00 to potentially re-sell the US Dollar. The impulsive selling in the last few weeks continues to be challenged by 'too timid' up moves. The leading/future kumo cloud continues in bearish territory, first time it occurs since Dec 19, a negative sign for sentiment, which should result in greater confidence to still be a seller on strength. Meanwhile, the chikou span (magenta line) continues to faces no troubling areas ahead until faced with the top of the kumo cloud.

USD/JPY H1 Chart

We had a weak cross on the H1 chart, a communication that short-term corrective moves may extend until 102.00, level where the real battle will take place. Before a potential retest, buyers should overcome a thick kumo cloud, with the first signs (price consolidating inside the cloud) suggesting that an attack towards the top of the cloud at 101.80/85 is a real possibility now. Also note, the chikou span has broken through the kijun line, further reinforcing a extension of the correction in Asia.

Nikkei 225 Futures Daily Chart

Failure to break through 14,000 in the Nikkei 225 supported a recovery in the Yen crosses on Tuesday. The rebound allows further room for correction as no congestion areas are detected near by, which if combined with the positive sentiment in the SP500 (up 0.75%) creates some upside risks for the session ahead. That being said, the dynamics in the Nikkei 225 market have changed, and until price action does not negate the bias, selling on strength at higher levels (14,600-14,800) is still favoured. The combination of a bearish leading kumo cloud and the chikou span facing no congestion (cloud broken) supports the notion of selling rallies.

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