Technical Analysis – USDJPY eyeing sub-100 after it drops below cloud

The yen has managed to rally against the dollar for most of 2016, but is this rally running out of steam around the psychologically important 100 level? According to the charts, the most likely outcome is another test of 100 and then a possible break.

Although the daily chart gives a clearer bearish picture, here the 4-hourly chart is examined for shorter-timeframe trades. A test of 100 (100.06) both on September 22nd and September 27th showed the level holding and led to the US dollar rallying as far as 101.75-101.80. This was also the top of the cloud and the dollar was unable to exit the cloud on the upside. The top of the cloud at 101.75 could be a resistance level then. Subsequent dollar selling has led to the pair falling below the cloud to 100.80. Tenkan-sen is still above the Kijun-sen line however and for a confirmation of the bearish bias, Tenkan-sen (red line) has to drop below Kijun-sen (blue line). Present price action is below both lines right now, which is bearish in itself.

A very key area for dollar/yen then is the 99-100 level. Dollar/yen has not traded below the 99 level since 2013. Following Brexit, the pair tested the 99 level but quickly rebounded above 100. Levels that should be watched are 100, 99.60 (2-month low) and of course around 99 (post-Brexit and 3-year low).