Trade view /
08 July 2016 at 7:59 GMT
– We are in consolidation mode ahead of the much anticipated nonfarm payrolls figures today. Our medium- and long-term bias remains bullish but it is always a bit of coin flip going into NFP.
One interesting pair, and definitely a contrarian outlook at the moment, is USDJPY. Longer timeframes would highlight that we could reverse from current levels. The main issue with this view is the fact that EURJPY and AUDJPY are still bearish, but only after corrective bounces. I think that this view would be more on euro and Australian dollar weakness than yen strength.
Breaking down the timeframes:
Monthly – We have moved down to the previous support area (see highlighted circles) and spiked through the 50% pullback level of 100.57 (from 75.30-125.85). This is also a reverse trendline support from the 1998 and 2007 peaks. If we hold here it could possibly form a right shoulder of a bullish reverse Head and Shoulders pattern. Far too early to tell.
Source: Saxo Bank
Weekly – Probably the most important timeframes for this contrarian outlook. We have completed a bearish five-wave pattern (Elliott Wave) at the 261.8% extension level of 100.44. This dictates that we should at least get a correction to the upside. Last week posted an Inside Harami candle highlighting investor indecision at these levels.
Source: Saxo Bank
Daily – Posted nine inside soldiers up to now as choppy price action continues. The main upside barrier for this pair is seen at 111.44. This has been pivotal on four occasion this year and makes a good medium-term upside target.
DeMark – It should be noted that other yen crosses are showing these patterns and DeMark counts:
AUDJPY – At the 161.8% extension level of 74.61 (from 105.37-86.36) while posting a DeMark exhaustion 13 on the daily chart.
EURJPY – At a 161.8% extension level of 111.21 (from 149.54-125.82) and an intraday 261.8% extension of 110.96 (from 114.78-113.32). DeMark exhaustion on two hours.
GBPJPY – Posting a 12 count this week so close to exhaustion. A 423.6% extension level is seen at 125.26 (from 195.92-179.24).
USDJPY – Exhaustion 13 count on two hours with a Doji bottom.
We need to see some follow through buying from current levels with a break of the trend (101.05) needed. With a stop below Wednesday's low (100.20), this makes a very favourable medium-term call (approximately 9/1 risk against reward) even if we are counter trending. We would recommend half size.
Management and risk description
Buy a break of 101.20
medium term 2-4 weeks
— Edited by Clare MacCarthy
Non-independent investment research disclaimer applies. Read more