JPY crosses in bullish formations
USD – We got our USD pullback from the 261.8% extension level of 87.54 (from 88.51-88.14). There are three reasons why the USD looks set for another move lower:
1. We have pulled back to the 61.8% Fibonacci level of 88.15.
2. This is also a possible right shoulder in a larger Head and Shoulders formation (offering great risk/reward).
3. An AB=CD formation has been completed.
For those looking for confirmation, a break of 88.02 (bespoke support) should send the index aggressively lower.
The JPY pairs all look bullish today so I will talk through chart formations and set-ups. I don’t think this is going to be a prolonged rally now (reasons explained below).
Buying dips up to this area (118.90-119.00) is the play.
EURJPY – Mixed results for the last four days as we hold within a channel formation. This can also be seen as a bullish flag with a break of 147.40 confirming the outlook. We would then look to 148.14. I am buying dips this morning. It really needs to break the channel base to negate the view.
In the medium term, I expect further losses in this cross with the daily Evening Doji Star formation posted form the high.
Lots of European figures this morning so we can expect a bumpy ride.
GBPJPY – Mixed results for the last six days but, with the presence of higher daily lows, this has formed a bullish ascending triangle formation that has a bias to break higher (through 186.00). We have bespoke support at 185.40 and, with this being near the trend of higher lows, is an ideal place to go long. A break of 186.00 should take us to 186.86 (a 161.8% extension) and possibly beyond. A break of 185.00 and the outlook is broken.
AUDJPY – After hitting an intraday 261.8% extension level at 100.26 (from 102.81-101.84), the cross has posted little net change for the last two days in succession. This volatility is common in corrective patterns.
Although we have seen a three-wave pattern higher, this only reached the 38.2% pullback of 101.01 and is not seen as ample. We prefer to focus on the 101.36-48 area. This is the 50% Fibonacci and an AB=CD formation.
Over the medium term we turn bearish once more with the weekly chart likely to post a bearish Evening Doji Star pattern.
Management and risk description
Entry: Long at 147.13 (doubling up on a break of 147.40).
Time horizon: 2-3 days.
— Edited by Oliver Morrison
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