USD/JPY Forecast: Bears in control after Head and Shoulders breakdown

Omkar Godbole FXStreet Contributor

The US dollar was offered across the board on Friday after the US data missed already low expectations - CPI, Retails Sales, IP and Consumer Confidence all printed weak. The Washington tax reform delay isn’t helping matters either.

The Dollar-Yen pair fell to a low of 112.25 on Friday before witnessing a moderate technical recovery this Monday morning in Asia. The spot was last seen trading around 112.60. Upbeat China data released earlier today may lift European stock markets and keep Yen under pressure, although upticks in USD/JPY could be met with fresh offers, courtesy of the falling inflation expectations in the US.

Technicals

Resistance

112.89 (head and shoulders neckline - now acting as resistance)
113.10-113.00 (5-DMA + sliding trend line hurdle on the 1-hour chart)
113.58 (right shoulder high)
113.69 (July 5 high)

Support

112.32 (38.2% Fib R of 108.80-114.49)
111.67 (4-hour 200-MA) - 111.65 (50% Fib R of 108.80-114.49 + 100-DMA)
111.14 (June 26 low)
111.00 (zero levels)

1-hour chart

Observations

Head and Shoulders breakdown
Bearish 100-MA & 200-MA crossover

Commentary:

Head and shoulders breakdown has opened doors for 111.29 (target as per measured height method). The 1-hour RSI’s recovery from the oversold territory is falling apart near 50.00 levels. Meanwhile, the 4-hour RSI is yet to hit the oversold territory, thus suggesting room for further losses in the pair. The downward sloping 1-hour 50-MA (currently at 113.00) is likely to cap gains in the pair. Failure to hold Asian session gains followed by a break below 112.32 could yield another leg lower to 111.65 levels.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.