The Japanese Yen has continued to trade within the July opening-range against the US Dollar with the immediate focus on a break of the objective weekly range as we head into today’s Fed rate decision. These are the updated targets and invalidation levels that matter on the EUR/USD charts this week. Review this week’s Strategy Webinar for an in-depth breakdown of this Euro trade setup and more.
Japanese Yen Price Chart – USD/JPY Daily
Technical Outlook: USD/JPY posted an outside-day reversal off confluence resistance at the monthly opening-range highs yesterday at 108.92-109.02 – a region defined by the 38.2% retracement of the April decline and the mid-May swing low. Note that daily RSI shows momentum largely holding between 40-60 since the start of the month and may offer further conviction on a directional bias once we clear the July range.
Monthly open support rests at 108.18 backed closely nu the 2017 low-day close at 107.83 and basic channel support. Ultimately a break below the yearly low-day close at 107.16 would be needed to mark resumption of the broader downtrend. A topside breach looks to challenge subsequent resistance targets at the 100% ext at 109.42 and the objective yearly open at 109.67– both levels of interest for possible exhaustion IF reached.
Why does the average trader lose? Avoid these Mistakes in your trading
Japanese Yen Price Chart – USD/JPY 120min
Notes: A closer look at price action shows USD/JPY trading within the confines of an ascending pitchfork formation extending off the June / July lows – note that the weekly range is now defined by yesterday’s reversal candle just below confluence resistance at 108.92-109.02. Initial support rests with median-line / Sunday low at 108.42- a break below this level exposes 108.18 and 107.84/87 – look for a bigger reaction there IF reached.
Bottom Line: USD/JPY has set a clean weekly opening-range just below resistance heading into the FOMC interest rate decision later today. From a trading standpoint, I favor fading a spike higher but at the end of the day, look for the break of this range for guidance. Keep in mind we still have US Non-Farm Payrolls (NFP) on tap into the August open- stay nimble. Review my latest Japanese Yen Weekly Price Outlook for a longer-term look at the technical picture for USD/JPY.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
USD/JPY Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-long USD/JPY – the ratio stands at +1.28 (56.1% of traders are long) – bearish reading
- Traders have remained net-long since May 3rd; price has moved 3.0% lower since then
- Long positions are 2.4% lower than yesterday and 12.8% lower from last week
- Short positions are 9.7% higher than yesterday and 11.3% higher from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/JPY prices may continue to fall. Yet traders are less net-long than yesterday & compared with last week and the recent changes in sentiment warn that the current USD/JPY price trend may soon reverse higher despite the fact traders remain net-long.
See how shifts in USD/JPY retail positioning are impacting trend- Learn more about sentiment!
Relevant US / Japanese Data Releases
Economic Calendar – latest economic developments and upcoming event risk.
Active Trade Setups
– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex