USD/JPY outlook: Rises on dovish BoJ, initial reversal signal looks for confirmation

Slobodan Drvenica Windsor Brokers

USD/JPY

USDJPY accelerated higher on Wednesday, as traders collected some profits from steep fall in past few days, fueled by risk aversion which boosted demand for safe haven yen.

Japanese currency made an impressive rally of 8.5% vs US dollar in July and early August, boosted by recent interventions and BOJ rate hike, while the latest strong migration into safety lifted yen to eight-month high.

Today’s comments by BOJ official showed unexpected shift in policy outlook, souring the sentiment and adding pressure on yen.

Fresh acceleration after Tuesday’s Doji candle with long upper shadow signaled indecision, adds to recovery signals and the price broke above initial resistance at 146.43 (Fibo 23.6% of 161.80/141.68 fall) with close above this level to reinforce near term structure for extension towards targets at 149.36 and 150.00 (Fibo 38.2% / psychological).

Adding to positive near term signals was a false penetration into weekly cloud, with long tailed weekly Doji and formation of a bear trap.

However, daily studies are predominantly in bearish configuration (MA’s above the price / momentum deeply in negative territory) and require caution.

Lift above daily Tenkan-sen (148.45) will be needed to ease existing downside risk, while break of 149.36/150.00 pivots to signal reversal.

Res: 147.90; 148.45; 149.36; 150.00.
Sup: 146.43; 143.62; 141.68; 140.00.

Interested in USD/JPY technicals? Check out the key levels

1. R3 148.68
2. R2 147.53
3. R1 145.93
PP 144.78
1. S1 143.17
2. S2 142.02
3. S3 140.41

Author

Slobodan Drvenica

Windsor Brokers

Industry veteran with over 22 years’ experience, Slobodan Drvenica joined Windsor Brokers in 1995 when he was an active trader for more than 10 years, managing the trading desk and own account departments.

EUR/USD trims losses, back to 1.1830

EUR/USD manages to regain some composure, leaving behind part of the earlier losses and reclaim the 1.1830 region on Tuesday. In the meantime, the US Dollar’s upside impulse loses some momentum while investors remain cautious ahead of upcoming US data releases, including the FOMC Minutes.

GBP/USD bounces off lows, retargets 1.3550

After bottoming out just below the 1.3500 yardstick, GBP/USD now gathers some fresh bids and advances to the 1.3530-1.3540 band in the latter part of Tuesday’s session. Cable’s recovery comes as the Greenback surrenders part of its advance, although it keeps the bullish bias well in place for the day.

Gold remains offered below $5,000

Gold stays on the defensive on Tuesday, receding to the sub-$5,000 region per troy ounce on the back of the persistent move higher in the Greenback. The precious metal’s decline is also underpinned by the modest uptick in US Treasury yields across the spectrum.

Crypto Today: Bitcoin, Ethereum, XRP upside looks limited amid deteriorating retail demand

The cryptocurrency market extends weakness with major coins including Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) trading in sideways price action at the time of writing on Tuesday.

UK jobs market weakens, bolstering rate cut hopes

In the UK, the latest jobs report made for difficult reading. Nonetheless, this represents yet another reminder for the Bank of England that they need to act swiftly given the collapse in inflation expected over the coming months.

Ripple slides to $1.45 as downside risks surge

Ripple edges lower at the time of writing on Tuesday, from the daily open of $1.48, as headwinds persist across the crypto market. A short-term support is emerging at $1.45, but a buildup of bearish positions could further weaken the derivatives market and prolong the correction.