USD/JPY Forecast: Double bottom reversal or sell-off to 111.40?

The Dollar-Yen pair failed at 50-DMA hurdle in the Asian session on Monday as the unwinding of the Trump trade gathered pace. This was accompanied by an increase in demand for the Japanese Yen and other safe haven assets on increased fears of global trade wars.

Trump signs executive orders on TPP exit

US President Donald Trump signed the executive order formally ending the United States' participation in the Trans-Pacific Partnership. Though the order was largely symbolic (the deal was already essentially dead in congress), it does signal that Trump intends to “walk the talk”.

So far, the Asian markets are holding up well to the news. Australia’s S&P/ASX 200 is up 0.44%, while Japan’s Nikkei is down 0.40%. S&P 500 futures are trading dead flat.

The Dollar-Yen pair is trading 0.11% higher on the day around 112.82 levels. The pair could take out the session low of 112.52 and resume the slide towards 111.40 if the equity markets turn risk averse.

Technicals - Falling channel intact

4-Hour Chart

• Take note of the confluence of trend lines around 111.40. The level is likely to offer a strong support.
• A failed bullish break from the falling channel followed by a drop to 112.52 suggests the bears remain in control and could take the pair down to 111.40 levels.
• The rebound seen at the time of writing could run into resistance at 113.62-113.75. Moreover, the daily and 4-hour RSI is yet to hit the oversold territory. Thus, fresh offers are anticipated on the rise.
• Only an upside break from the falling channel would suggest a temporary low has been made and the spot is moving towards double bottom neckline level of 115.62. The only factor that supports a corrective move is the upward sloping 50-DMA.

AUD/USD Forecast: Fresh bids anticipated around 10-DMA

Daily Chart

• The retreat from the early Asian session high of 0.7604 suggests the near 90 degree rally from Dec 23 low of 0.7160 may be close to exhaustion… as suggested by the daily MACD, which is losing height.
• Hence, a pull back to 10-DMA level of 0.7524 and possibly to 0.75 (100-DMA and 200-DMA) could be seen.
• However, both 5-DMA & 10-DMA are sloping higher, which indicates a rebound from 0.75-0.7524 is likely. The subsequent move could test supply around 0.76-0.7632 levels.