The Clinton-Trump sideshow is now out of the way and USDJPY
traders can get back to considering things that really matter – like what the Bank of Japan is up to. Governor Haruhiko Kuroda spoke on Monday and offered some interesting insights into the bank’s “new framework” for monetary policy
He speaks again on Thursday but is unlikely to add anything new. But the market is already testing his resolve: the yield on the 10-year JGB
is below target at –0.07%.
Meanwhile, the probability of a US Federal Reserve
rate hike in December has fallen back under 50%, taking away support for the USD. Chair Janet Yellen
appears before Congress over the next two days but the topic is banking regulation so we shouldn’t expect much in the way of comment on monetary policy.
Friday looks like a more promising date for some action in USDJPY as we will get inflation updates in both Japan and the US, the latter being the price index for Personal Consumption Expenditures (PCE), the Fed’s inflation benchmark.
Management and risk description
For the past few months the dollar has been trading in a contracting Symmetrical Triangle pattern, which appears close to completion (see daily chart below).
“Zeroing-in” on the hourly chart (refer below) there are two pattern structures of note. The first is a Head and Shoulders continuation pattern and the second is a developing Descending Triangle (refer Hourly chart).
Key support now lies at 100.10/99.10 and a break of this support is probably enough to trigger a strong sell-off toward this year’s 99.10 June low, then the mid-98.00s (see daily and weekly charts below).
A successful downside break from USDJPY’s 3-month Symmetrical Triangle would project a downside move as low as 92.00 over the coming weeks.
Entry: A break below 99.90 support today is seen as a selling opportunity.
Stop: 100.42, initially.
Target: 50% at 99.18 and 50% at 94.96.
Time horizon: Allow enough time for the downside to express itself on a break.
USDJPY hourly chart (click to expand)
USDJPY daily chart (click to expand)
USDJPY weekly chart (click to expand)
Source: ThomsonReuters. Create your own charts with SaxoTrader; click here to learn more
— Edited by Susan McDonald
Non-independent investment research disclaimer applies. Read more