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Wednesday's FOMC outing showed the Powell Fed to be less model-driven than its predecessors, but the lack of any language confirming four 2018 rate hikes sent the dollar plunging lower.
Medium term
Trade view / 08 July 2016 at 7:59 GMT

Medium-term contrarian outlook for USDJPY

Analyst / PIA First
United Kingdom
Instrument: USDJPY
Price target:
Market price:

USD Index – 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. 
 Source: Saxo Bank

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. 
 Source: Saxo Bank

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.
 Source: Saxo Bank

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


Entry: Buy a break of 101.20


Target: 111.40 area 

Time horizon: medium term 2-4 weeks

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more
Dj TinTin Dj TinTin
Hi Ian what if the US payroll data is strong today will the bulls be looking short? ?
Ian Coleman - First 4 Trading Ian Coleman - First 4 Trading
It is a huge day for figures (and the USD). I think it will outline the outlook for the next month or two. I am a strong USD bull. However, I can honestly say that I have rarely made money on the actual release day. Just trying to trade a long term view
sam wightman sam wightman
That`s a cracker !
( will the Bulls be looking short )
Ian Coleman - First 4 Trading Ian Coleman - First 4 Trading
thanks Sam .... we need good figures but we will see
assi assi
Hi Ian, do you think to sell AUDJPY is agood idea...??
assi assi
Hi Ian, please see attach, enteresting think so ??
Ian Coleman - First 4 Trading Ian Coleman - First 4 Trading
Hi Assi ..... no. It is in a corrective phase higher.
Ian Coleman - First 4 Trading Ian Coleman - First 4 Trading
It is all about timing !!!!


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