USD/JPY Forecast: Potential for correction after ‘golden cross’ on daily & monthly chart
|The Dollar-Yen pair continues to flirt with 114.00 levels. The pair dropped to 113.50 levels on Tuesday before ending the day at 113.98 levels.
The rise from the low of 113.50 was fuelled by an increase in dollar demand after data released in the US showed the factory orders jumped 2.7% in October; the fourth straight monthly gain and the biggest since January 2015.
There are no major Japanese events on schedule. The US economic calendar is light on releases as well.
EUR/JPY rally could cap losses around 112.00
Euro’s sharp bullish reversal on Monday suggests the US dollar may have topped out, at least for the short-term. Thus, a technical correction in the USD/JPY is likely, although the losses could be capped around 112.00 levels in case the EUR/JPY cross continues to rally.
Technicals - Lagging indicator signals potential for correction
Daily chart
Monthly Chart
- The ‘golden cross’ - bullish 50-MA & 200-MA crossover - has been confirmed on the daily chart as well as on the monthly chart.
- However, the ‘golden cross’ is a lagging indicator and is has been observed time and again in the different markets that confirmation (of the crossover) is often followed by a bout of correction.
- There is a bearish price-RSI divergence on the daily chart as well, which adds credence to the possibility of a correction.
- The key psychological support of 110.00 could be put to test if the pair closes below 112.00 levels.
- On the higher side, only a daily close above 115.00 would signal continuation of the rally from November 9 low of 101.20.
AUD/USD Forecast: Revisit to 0.7311 likely
Daily chart
- Pair’s repeated failure to take out 0.7489 (38.2% of Nov 8 high – Nov 21 low) if followed by a drop below 0.7400 today on a weaker-than-expected Australia Q3 GDP release would open doors for a retreat to 0.7311-0.73 handle.
- A daily close below 0.73 would signal that the sell-off from the November 8 high of 0.7778 has resumed.
- On the higher side, only a daily close above 0.7489 would signal bearish invalidation.
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