In this series we scale-back and take a look at the broader technical picture to gain a bit more perspective on where we are in trend. The Japanese Yen is trading just below yearly range resistance with the FOMC interest rate decision on tap this week. Here are the key targets & invalidation levels that matter on the USD/JPY weekly chart

USD/JPY WEEKLY PRICE CHART

USD/JPY Price Chart - Weekly

Notes: The yen has been under pressure for the last three weeks with USD/JPY approaching a key resistance range at 112.65-113.27. This region is defined by the 2018 open, the 200-week moving average and the 61.8% retracement of the 2017 decline. Note that this zone stands just pips from the objective yearly opening-range highs at 113.38.

A breach above this threshold targets subsequent topside resistance objectives at 115.31 and the 2017 open at 116.98. Initial weekly support stands at the 52-week moving average / former trendline resistance at ~110.40 with a break below 109.92 needed to suggest that a larger price reversal is underway.

Bottom line: The USD/JPY rally remains vulnerable heading into this key resistance range. From a trading standpoint, the near-term opportunity may be to fade against this threshold but we’ll need some convincing price action to warrant such a trade. A weekly close above would be needed to validate the breakout but for now, I’m looking for exhaustion.

USD/JPY TRADER SENTIMENT

USD/JPY Trader Sentiment

  • A summary of IG Client Sentiment shows traders are net-short USD/JPY – the ratio stands at -1.23 (44.8% of traders are long) – weak bullish reading
  • Traders have remained net-short since September 13th; price has moved 1.1% higher since then
  • Long positions are 10.3% higher than yesterday and 63.4% higher from last week
  • Short positions are 5.3% higher than yesterday and 45.9% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USDJPY prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current USDJPY price trend may soon reverse lower despite the fact traders remain net-short.
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