Bottom line: USDJPY medium term outlook still remains bullish against 101.18 lows since March 2020. The currency had dropped below 105.00 handle yesterday before bulls were back in control. They remain poised to push through 107.00 immediate resistance going further.
Fundamental Outlook:
NZDUSD had managed to push higher towards 0.6759 levels before finding renewed selling pressure. The exchange rate has dropped below 0.6700 as we prepare to publish and might remain under pressure. NZDUSD Q2 GDP has shrunk to -12.4%, which restrict pushing through 0.6790 highs over the next few weeks. Watch out for RBNZ monetary policy on September 23, 2020 for further guidance.
USDJPY has given in over 200 points in the last 5 trading sessions and print 104.80 yesterday. The exchange rate is trading above 105.10 as we prepare to publish and it remains to be seen if safe haven US Dollar could recover against Japanese Yen. The anti-risk Japanese Yen has significantly gained against EURO, GBP and USD in the past few sessions.
SPX500 pushed higher through 3428 levels before selling off post FOMC yesterday. The indice finally managed to close lower by -0.50% at 3385 mark. Futures are trading lower today around 3360 mark for now and it remains to be seen if risk aversion continues further. The US Dollar Index might further strengthen in that case.
Technical Analysis:
USDJPY has dropped from 106.00/20 levels through 104.80 in the last few trading sessions and might have found interim support. Bulls would remain poised to be back in control until 104.20 support is intact. A push through 107.00 would be required to confirm that bulls are back into play.
USDJPY weekly chart has been suggesting a sideways consolidation within a long term triangle. After printing lows at 101.18 in March 2020, the currency might be looking to push towards 112.00 and higher to complete the rally. Ideally, 101.18 support should hold for bullish structure to remain intact.
Further, USDJPY had earlier dropped to 104.20 mark before bouncing to 107.00 levels. Please note it was just below the fibonacci 0.618 retracement of the rally between 101.18 and 111.75 respectively. Hence, the structure remains constructive for bulls until 104.20 support holds well.
Keeping the above in mind most traders might hold long positions from 106.00 levels, with a protective stop below support around 104.00 and projected targets towards 107.00, 109.85 and beyond. Only a break below 104.00 would change the above bullish structure.
Prepared by
Harsh Japee, Technical Analyst.
USDJPY Chart
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