USD/JPY Forecast: Head & Shoulders breakdown, could test 200-DMA
|1-hour chart
Observations-
Head & Shoulders breakdown
1-hour 50-MA & 1-hour 100-MA have topped out
Resistance: 111.29 (1-hour 50-MA), 111.41 (100-DMA), 111.74 (June 21 high)
Support: 111.15 (50-DMA), 110.81 (June 9 high on 4-hour chart), 110.70 (200-DMA), 110.65 (1-hour 200-MA)
Comments:
- The head and shoulders breakout has opened doors for a sell-off to 110.49 (target as per the measured height method).
- Wednesday’s spinning top (bullish exhaustion) candle followed by a head and shoulder breakdown on the 1-hour chart signals the spot is likely to test support at 110.65 (1-hour 200-MA) - 110.70 (200-DMA) - 110.49 levels.
- On a larger scheme of things, the outlook remains constructive. Only a daily close below 110.00 would signal bullish invalidation.
- On the higher side, only a daily close above 111.79 would signal continuation of the rally from the recent low of 108.80.
Falling inflation expectations are dollar bearish
The Dollar bulls may find it hard to make their presence felt given the long-term inflation expectations hit a 8-month low. The yield curve continues to flatten, suggesting slowdown in the economy. Speculation is gathering pace that Fed may delay the rate hike beyond December.
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