27 February 2020 Analysis (Forex, CFDs, Cryptocurrency)Currency PairsUSD/JPY
(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)
Since kicking off 2017, USD/JPY has been busy carving out a descending triangle pattern. The breakout for this configuration is common to the downside, but an upward breakout is considered more reliable and profitable. In recent movement, price elbowed a touch outside the upper boundary of the aforementioned descending triangle to 112.22, and is now seen retreating lower.
Outside of the current pattern, a supply area is visible at 126.10/122.66, while lower on the curve we have a demand area at 96.41/100.81.
Currently, the pair trades +1.89% on the month.
Outlook brought forward from previous analysis –
The combination of a channel resistance from 108.47 and supply at 112.66/112.08 held price action lower at the tail end of the week. Follow-through selling has been seen this week, stretching to demand at 109.52/109.99 in recent trade, typically labelled a ‘rally-base-rally demand’. Although an appealing area in and of itself, channel support (104.44) could make an entry in the event additional selling materialises, shadowed by the 200-day SMA.
The RSI indicator also voyaged into overbought terrain in recent trading, exiting lower earlier in the week and now hovering just above the 50.0 value.
Supply-turned demand at 110.02/110.23, although suffering a mild breach to lows at 109.89, remains in view. A recently violated trend line support serves as resistance, which could pressure the unit beyond 110.02/110.23 to demand plotted at 109.30/109.53. A turn higher, nonetheless, has demand-turned supply on offer at 111.38/111.10.
The US dollar was quoted higher against the Japanese yen Wednesday, modestly climbing to highs at 110.70 and snapping a three-day bearish phase. The upward lift came from a modest rebound in the US dollar, fuelled by a bid in US Treasury yields. According to Bloomberg, volatility traders bet stock turmoil will get worse as the coronavirus virus spreads, which could benefit the safe-haven Japanese yen.
110 remains a dominant fixture on this timeframe, while 110.50 proves a troublesome resistance to dethrone. To the upside, supply at 110.88/110.77 is stationed close by, positioned a few points south of the round number 111 and the 100-period SMA.
While daily demand at 109.52/109.99 could send price action higher today, the fact we have monthly price fading notable structure is likely to hamper upside from here.
Therefore, H4 trend line resistance may continue to cap upside, highlighting 110.50 and the H1 supply at 110.88/110.77 for potential selling opportunities.
Disclaimer: The information contained in this material is intended for general advice only.